What is Dollar Cost Averaging

You might have heard of the term dollar cost averaging, or DCA. Let’s not change the terminology to Euro Cost Averaging here. Even for our European purposes, the principle works.

Simply put, DCA is a strategy slowly put your capital to work, for example in the stock market. The opposite of dollar cost averaging is a one-time lump-sum investment. Please know that when I use the example of the stock market here, you can also read “real estate” or “crowdlending”.

Basically, what you do is simple. You invest money on a very regular basis, for example, every month. No matter how high or how low the stock market is valued, you will put in the money. Usually, this will be the same amount of money every interval.

Now don’t take this literally. If you invest 950 EUR the first month, and 980 the next, you’re still dollar cost averaging. The main principle is that you don’t time the market by waiting to invest when the market is high, or investing more than usual when the market is low.

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