Managing Risk: The Magic of Dollar Cost Averaging (Day 10: 2018-01-10)

in #blockchain7 years ago

Many people avoid investing because they are afraid of making a costly mistake. In hindsight, it is always easy to see what we COULD have, or SHOULD have, done- AFTER we learn what actually happened. But, even the best investors learn they can rarely "time the market". Even investors, who are relatively certain that an asset will go up or down, can't predict how quickly or how far it will move! This is because of the perception aspect of pricing. Just because you might think a price is too high, doesn't mean that lots of others feel the same way. And as long as more buyers pay higher prices, the price will keep rising!

To manage the risk of this uncertainty, investors often use a technique, called Dollar Cost Averaging, to make timing much less important.

Don't forget to view the short video on the Investopedia page as well as the written explanation. The thing to remember: the purpose of dollar cost averaging is to eliminate the need for you to predict the unpredictable!