Last week, Bitcoin and Ethereum made new all-time high prices. It is no longer a novelty to see people on the news or social networks talking about these digital assets. Today I will not do technical analysis of cryptocurrencies, but I want to talk to you about an investment strategy that has paid off over time. This strategy is called dollar cost averaging.
If you have ever watched a sports competition, you will have noticed that athletes / teams tend to use strategies to win a match. For example, one of the most popular sports in the world is soccer. Although it is true, soccer teams are usually made up of 20-30 players, in a soccer game only eleven players play per team. Each team has to use these players in an efficient way in order to achieve a favorable result. This is where the coach formulates a strategy and decides which players will participate in the game and which scheme to use. The coach can opt for a defensive, neutral, or aggressive scheme.
In the world of investments something very similar happens. Not only do you have to implement an investment strategy, but you also have to study which asset among so many can provide you with the most profitability with very little risk. There are various financial assets available in the market where people can invest their money. Some of these options are company stocks, government bonds, precious metals, cryptocurrencies, etc. I do not intend to refer to the risk / benefit of an asset, but I will talk about a strategy that can bring you many benefits.
Dollar cost averaging consists of purchasing fixed quantities of an asset at regular intervals over a long period of time. If you do not have time or lack of knowledge to follow the performance of a market or asset, you can apply this investment strategy. The first and most difficult thing you have to do is decide which asset to buy. When you have made that decision, you no longer have to worry about reading the news, studying financial statements, learning to do technical analysis.
Let's look at an example:
If you had invested five dollars a day buying Bitcoin for the last 9 years, today, you would be a millionaire and would have a total of $ 4,273,940. If you had done the same and bought gold instead of Bitcoin, today you would have a total of $ 22,484, and if you bought shares of an ETF that tracks the price of the Dow Jones, you would have $ 28,722. Your net investment of $ 16,435 in the last 9 years, would have increased, 25,905.12%, 36.81%, and 74.76% respectively. There is a platform that allows you to obtain these numbers without having to do the calculations manually. DcaBTC is a Bitcoin investment calculator that helps people understand the importance of dollar cost averaging.
What happened in the world of cryptocurrencies last week?
- The Bitcoin network welcomed the Taproot update. If you want to read more about this, click here!.
Every Monday, I will publish a technical report on cryptocurrencies and other markets. If you have any questions, please don't hesitate to email me at email@example.com.
Note: the information you find in these reports is not financial advice. Your investment in cryptocurrencies or another asset has to be proportional to your level of understanding of it.
Until next time!
*The opinions expressed in this article are those of the author and do not necessarily reflect the views of the administrators of The Crypto Legal blog or the Lawgic Tec association.