Given that gold has performed well over the past 20 years, with an average annual gain of over 8%, it’s no wonder that the DCA strategy is quite popular among precious metals investors.
It is generally accepted that this strategy can improve the performance of an investment, especially if its price tends to increase over time, which has historically been the case for gold.
Of course, remember that this strategy cannot protect investors against the risk of falling market prices.
So if you want to get the most out of the DCA investment strategy, make sure you have these 3 things:
Patience: Dollar-cost averaging should be viewed as a long-term investment plan. This mainly means that you continually invest small amounts of money that do not have a significant impact on your daily life, while increasing the value of your portfolio.
Commitment: Whether you decide to invest once a month, once a week, or quarterly, you have to do it consistently no matter what happens in the market for it to work.
Capital: When you think about investing in general, you have to think of it as a long-term endeavor. So you may need to put some money aside, depending on your budget and your situation.
Experts recommend setting aside 3-6 months of expenses in your emergency savings account before you start investing seriously in virtually any asset like precious metals, cryptocurrencies, stocks, etc.
Now that you have learned how the DCA strategy works, you might as well know what potential returns it can bring you if you use it to build up your savings in gold and precious metals.
Imagine three different investors buying $500 worth of gold each month, each at a different time, between 1972 and 2022. Each year, Amanda buys gold at the highest price, Abraham at the average price, and Harry at the lowest price.
Each of them has invested €306,000 in gold over these 50 years.
Now suppose that in 2022 they decide to sell all their savings into gold.
Here’s what each of them would get in the end:
• Amanda: €1,429,925 (buys at the highest price)
• Abraham: €1,665,702 (buys at average price)
• Harry: €1,992,833 (buys at the lowest price)
As you can see, even Amanda, who always bought her gold at the highest price every month, still made a profit of over a million dollars.
This example clearly shows that the DCA strategy works if you are consistent with your investment.
With the DCA strategy, you don’t have to worry about ” timing the market” because you’ll be able to get an average buy price over time, so you don’t buy too much.
In addition, the DCA helps establish steady investment discipline, which is good for those who want to grow their portfolio over time, regardless of the price of the asset they buy with this. strategy.
When it comes to precious metals, the DCA strategy is a tool that allows you to build your savings and wealth in gold over a long period.
Since gold prices have historically increased in the long term, but tend to fluctuate in the short term, the DCA strategy can help smooth out these fluctuations and take advantage of potential long-term gains.
