The ups and downs of the capital market are normal things that happen in the realm of investment. This is known as volatility or market risk.
Well, one way of investing to outsmart the ups and downs of market risk is by using the dollar cost averaging . This way of investing is easy to practice, especially for novice investors.
The Newbie can use this concept in various types of investment instruments, whether it's gold investment, mutual funds, stocks, deposits, and so on.
By using the dollar cost averaging , you can maximize the potential profit, while reducing the risk of loss in investment. However, what exactly is dollar cost averaging ?
What is Dollar Cost Averaging ?
Dollar cost averaging is a concept to save regularly by investing the same amount of money every week or month, regardless of current economic conditions.
This method will help you be more disciplined in buying investment units. Either when the condition is up or down. Not only that, there are various other benefits of implementing dollar cost averaging .
What is Dollar Cost Averaging in Mutual Funds?
For those of you who are interested or have started investing in mutual funds, you must have often heard the term Dollar Cost Averaging, right? So, what exactly is Dollar Cost Averaging in mutual funds?
In investing, many people want big profits in a short time. Are you one of them?
Even though it could happen, it's not as easy as you think, The Newbie. You need to do some analysis or find the right strategy to achieve the profit you want to achieve.
Then, how to get profit from investing in mutual funds?
As we know, mutual funds are investments that rely on investment managers to manage our funds, The Newbie Even so, you also need to know mutual fund investment strategies, one of which is Dollar Cost Averaging.
What is Dollar Cost Averaging?
If you think that a one-time investment can immediately generate a lot of profit, I think you need to think again, The Newbie You see, in the Dollar Cost Averaging strategy, it actually allows you to invest regularly to get a profit.
Quoted Forbes , Dollar Cost Averaging is a strategy for managing price risk when you invest, both in stocks and mutual funds. Instead of investing once, Dollar Cost Averaging actually requires you to invest regularly.
Forbes said, in the Dollar Cost Averaging strategy, with cost averaging, you divide the amount of money you want to invest and buy a number of small assets over time on a regular basis.
For example, you plan to invest IDR 1,200,000 in mutual funds this year. You have a choice: invest all your money right up front or you can invest IDR 100,000 every month.
If you choose to invest IDR 100,000 regularly every month, then you can apply the Dollar Cost Averaging strategy, The Newbie.
The Purpose and Benefits of the Dollar Cost Averaging Strategy
Benefits of Applying Dollar Cost Averaging
A Very Friendly Method for Beginner Investors
Many people are hesitant and afraid to invest, because they have to understand and learn various techniques and analysis. This is very important and needed.
However, if you have trouble finding it. Instead of not investing, applying the dollar cost averaging can allow anyone to start investing because the concept is like saving. So you just need to be consistent in doing it.
Preventing Bad Investment Moments
Furthermore, the dollar cost averaging can also prevent you from bad moments when investing. For example, when you buy a unit at too high a price, or resell it at a low price.
By using this method that requires consistency in investing, you will also get the average price. So, it won't be too high or too low.
Easy Like Installments
For those of you who don't have a big budget to invest at once or use the lump sum method. Applying dollar cost averaging can make it easier for you to invest like installments on an item. The difference is, what makes it light is that you are not making installments, but saving for the form of an investment.
Reducing the Risk of Loss
Because the concept is like installments to save on a regular basis, what makes the dollar cost averaging able to reduce the risk of loss in investing.
With the regular dollar cost averaging , The Newbie don't have to bother waiting for market timing . You just need to be consistent, increase the amount of your investment every week or month, and let the investment work.
At first, the value of the investment you have looks small. However, if it is done regularly in the long term, it will eventually become a hill. The numbers will surprise you!
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