Dollar-Cost Averaging: How To Make Money on The Market?
A dollar-cost averaging guide to financial freedom.
Table of Contents
1. What is Dollar-Cost Averaging (DCA)?
Ever hear someone talk about “DCA” and think, Whatâs the big deal? or maybe, Why should I care? Donât worry, Iâve got you.
Dollar-Cost Averaging, or DCA, is one of the easiest and most reliable ways to invest without needing to be a stock market wizard. Hereâs the gist: with DCA, you invest a fixed amount of money on a regular schedule, regardless of whatâs happening with the price. Thatâs it. No fancy formulas, no trying to âbuy low and sell high.â Just simple, steady investing.
The Power of DCA, Simplified
Imagine youâre buying Bitcoin every monthâmaybe $100 each time. When prices are low, your $100 buys you a bigger slice of Bitcoin; when prices are high, it buys a smaller slice. This simple act of investing the same amount each time does something clever: it averages out your purchase price over time.
And the best part? It turns the market into a piggy bank. Your money gets to work without you having to micromanage, guess market trends, or worry about whether youâre buying at the âperfectâ time.
Why Use DCA?
Because DCA keeps things simple and lets you stay calmâsomething most people struggle with in investing. Instead of freaking out over every price drop or getting swept up in market hype, DCA helps you focus on the long game.
Itâs not about âtiming the market.â Instead, itâs about building a solid portfolio without having to constantly second-guess yourself. And as long as youâre putting your money into good assetsâthink Bitcoin, Vanguard ETFs, blue-chip stocksâDCA helps you get more of the upside over time.
Ready to dive in? In the next page, weâll explore why âaveragingâ is so effective, especially if you want to avoid emotional investing and actually stick to a strategy that works.
“By acknowledging your biological tendency to buy high and sell low, you can admit the need to dollar-cost average… By putting much of your portfolio on permanent autopilot, you can fight the prediction addiction, focus on your long-term financial goals, and tune out Mr. Market’s mood…”
â Benjamin Graham, The Intelligent Investor
2. Why DCA Strategy Is So Effective
Alright, so weâve established that DCA means putting in the same amount of money regularly, no matter what the price is doing. But why is this âaveragingâ part such a game-changer?
DCA Keeps You Cool
Letâs face it: markets are a rollercoaster. Prices go up, prices go down, and your brain starts screaming, âSell!â or âBuy more now!â DCA takes the drama out of the equation. Instead of reacting to every swing, you stick to a plan and invest consistently, rain or shine.
This strategy keeps you from making the classic mistake: buying high and selling low. By averaging your costs over time, DCA lets you buy more when prices dip and less when they surge.
Does DCA Actually Make Money?
Good question. The short answer: yes, it can. The stock market has historically grown around 10% per year, and Bitcoin? Well, itâs been even wilder (in a good way). By consistently buying over time, you catch the marketâs growth without stressing about whether todayâs price is âright.â
The key is that DCA is about capturing the average over time. Youâre not trying to hit a home run on one big buy; instead, youâre aiming for slow, steady growthâthink tortoise over hare.
Of course, this doesnât mean DCA is a magic bullet. If you invest in bad assets, DCA wonât save you. Thatâs why itâs crucial to choose reliable assetsâBitcoin, S&P 500, maybe a few solid ETFsâand avoid anything too flashy.
Consistency Beats Market Timing
In the end, DCA works best when you keep at it. Itâs the easiest strategy to stick to because itâs simple and low-stress. Set it up, automate it if you can, and let it run.
On the next page, weâll look at how to get started with DCA and build a solid, reliable portfolioâone that you wonât need to babysit.
“You don’t want to hesitate to get in the market trying to have perfect timing; instead, use dollar-cost averaging and know that volatility can be your friend.”
â Tony Robbins, MONEY: Master the Game
3. How to Start with DCA
Now that you know the why behind DCA, letâs dig into the how. Itâs all about picking the right assets, setting up a consistent schedule, and letting the magic of averaging work for you.
Step 1: Choosing the Right Assets
The first rule? Keep it simple. DCA is most effective when youâre investing in strong, proven assets. Think Bitcoin, broad market ETFs like the S&P 500, or âblue-chipâ stocks. These are the kinds of investments that tend to grow over time and are less likely to disappear overnight.
If youâre tempted by the latest meme coin or a âhotâ new stock, consider this your friendly reminder: stick to reliable assets in your main portfolio. As the saying goes, âBoring is beautiful.â You want investments that can withstand the test of time, not just the hype of the month.
Step 2: Set Up Your Schedule
This part is simple. Decide how often you want to invest: daily, weekly, or monthly. Guess what? It doesnât make a huge difference in the long run. The key is consistency. Set a schedule you can stick to and automate it if possible, so youâre not relying on willpower every time.
Step 3: Start Small and Build Up
Especially if youâre new to investing, thereâs no need to jump in with huge amounts. Start with an amount youâre comfortable with, get into the rhythm, and see how it feels. Over time, you can always increase it.
Step 4: Automate and Forget (Mostly)
One of the best parts of DCA is that you donât have to micromanage. Many platforms (like ours!) let you set up automated DCA, so your money is put to work without you lifting a finger. Set it up, and let it do its thingâjust remember to check in every now and then to make sure your investments still align with your goals.
On the next page, weâll dive into how to build a balanced portfolio with DCA and why diversifying beyond crypto can make all the difference.
“If you’re buying [Bitcoin] and you’ve got less than a four-year time horizon, you’re just speculating in it. And once you’ve got more than a four-year time horizon, then the obvious thing is you dollar-cost average.”
â Michael Saylor, MicroStrategy
4. Building a Balanced Portfolio with DCA
DCA is a powerful tool, but it becomes even stronger when combined with a balanced portfolio. Hereâs the secret sauce: donât put all your eggs in one basket. A well-diversified portfolio helps you ride out market swings and protect your gains over time.
The Case for a âLazy Portfolioâ
A lazy portfolio is exactly what it sounds likeâa set-it-and-forget-it approach that doesnât need constant adjustments. You donât need to chase trends or watch the market every day. Instead, you create a mix of different assets that balance each other out.
Hereâs a simple formula to get started:
- 70% in a broad market ETF (like the S&P 500): This gives you exposure to a diversified set of stocks.
- 20% in Gold: A classic hedge against inflation and economic instability.
- 10% in Bitcoin: A growth asset that has shown serious long-term potential.
This kind of mix gives you stability and growth potential. Stocks provide steady gains, gold acts as a safety net, and Bitcoin brings in some spice with its high growth potential.
Why Diversification Matters
Hereâs the deal: crypto and stocks donât always move in the same direction. When one is down, the other might be up. By diversifying across different asset classes, you reduce the risk of your entire portfolio dropping at once.
And rememberâdiversification isnât about buying 10 different cryptocurrencies. Most crypto assets are highly correlated, meaning they move together. Thatâs why itâs better to spread your investments across truly different types of assets.
Keep It Simple, Keep It Consistent
If youâre using DCA, consistency is your superpower. By investing the same amount into this mix regularly, youâre building a solid foundation without stressing over every market move.
On the next (and final) page, weâll wrap things up with some final tips and helpful resources to keep you on track.
“If you like spending six to eight hours per week working on investments, do it. If you don’t, then dollar-cost average.”
â Warren Buffett, Berkshire Hathaway
5. Final Thoughts & Resources
Congratulations! Youâre now equipped with the essentials of Dollar-Cost Averaging and building a solid, stress-free portfolio. Letâs wrap up with a few final tips to keep your DCA journey on track and some resources to help along the way.
DCA in a Nutshell
To recap, DCA is all about consistency, simplicity, and patience. By regularly investing the same amount over time, you smooth out the highs and lows of the market. Itâs not about making flashy moves; itâs about creating a long-term strategy you can stick to.
- Choose Strong Assets: Stick with reliable investments like Bitcoin, the S&P 500, or a lazy portfolio mix.
- Set It and Forget It: Decide your schedule and automate it if you can. Donât overthink itâDCA works best when itâs consistent.
- Diversify: Balance your portfolio with uncorrelated assets like stocks, gold, and Bitcoin to reduce risk.
Common Pitfalls to Avoid
Here are a few common mistakes people make with DCA and how you can avoid them:
- Jumping on Trends: Stick to your strategy instead of chasing the ânext big thing.â Your portfolio should be built for the long haul.
- Panicking in Downturns: DCA works through both good and bad times. Keep investing even when prices dropâitâs part of the process.
- Overcomplicating: DCAâs power is in its simplicity. Avoid overanalyzing or trying to time the market.
Resources to Keep You on Track
- Deltabadger DCA Bot: Automate your DCA into crypto (and soon, stocks) with ease. Try our DCA bot
- DCA Calculator: Curious to see how much you could build over time? Use our DCA Millionaire Calculator.
- Further Reading: Check out books like The Intelligent Investor by Benjamin Graham or MONEY: Master the Game by Tony Robbins for deeper insights.
Ready to Start?
You now have everything you need to make DCA work for you. Set up your plan, stay consistent, and let the power of averaging take care of the rest. Hereâs to building a portfolio that lets you sleep easy at nightâone steady investment at a time.
“If youâre going to invest, there will be ups and downs. But if you stick with it and keep buying over time, youâll look back and be glad you did.”
â A Future You, Financially Independent
â
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing involves risks, including the possible loss of principal. Always conduct your own research before making investment decisions.