Jun 5, 2017
How Dollar Cost Averaging (DCA) Works for Stocks and ETFs
Dollar-cost averaging (DCA) works equally well for individual stocks as well as ETFs.
That’s because ETFs are priced and trade just like individual shares. This allows you to benefit from market fluctuations, and to diversify the asset price over time. It also means that you’ll be able to buy more shares when the price is low, and fewer shares when the price is high.
So if we adopt the same strategy of investing a fixed amount of money at regular intervals over time it should not make any difference if we are buying individual stocks or ETFs to benefit from DCA.
Even investors that are only able to set aside small amounts of capital can benefit from this strategy.
Investing smaller amounts can sometimes result in needing to buy fractional shares. Say for example an investor is saving $500 per month, and this month is interested in purchasing a stock or ETF that costs $52 per share. Putting all $500 to work, excluding brokerage fees, means they would purchase 9.6 shares. If the broker allows fractional ownership, then the investor can put this strategy on auto-pilot and not have to worry about getting too few shares each month.
Dollar cost averaging (DCA) and Auto-Stash
Auto Stash can make the job even easier, by allowing you to make small deposits and investments on a regular basis. Saving as little as $5 per week is enough to get started, and can add up over time, providing the investor with a solid capital base to build a respectable nest-egg.
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Not only will this take the stress out of investing, it also allows the investor to take advantage of dollar-cost averaging by making regular investments over time. DCA offers the investor a diversified share price instead of making an investment all at once.
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