When I started learning about investing, I kept seeing people say, “you should be DCA’ing,” or “you need a solid DCA strategy.” For about 30 min after asking a mischievous friend, I thought this was Direct Call Action, and he had me convinced that I needed to learn about stock market options. However, he later let me in on the joke and set me straight.
Answer: DCA or Dollar-Cost Averaging regularly purchases an asset at set intervals for set amounts regardless of the asset’s price (or investment). In other words, you are averaging out the cost of your investment by making regular payments over a fixed time.
Once I understood this concept, it opened my eyes to a new world of possibilities. Keep reading, and I will show you some math behind dollar-cost averaging. It should get you excited about the future and how you can use it to prevent common fallacies and other mistakes that people make when looking at a long time horizon.
Like anything with money, you should consult a trained professional for advice. I’m not a financial advisor, and this is not financial advice. Instead, I’m just teaching you about concepts, and it is up to you to bring these concepts to your advisor.
DCA Basics
I was unsure if I should make this section but decided it was the best choice given the need to make this concept as simple as possible. Although my friend teased me a little before explaining the idea, he took the time to ensure I fully understood and had not forgotten the lesson.
You can first understand that you already DCA in things you would never have considered. For instance, if you buy a coffee each day or even once a week, you have just made a dollar-cost average contribution to the bottom line of the coffee company you choose to purchase from. The analogy works, but it is not the same because, typically, commodity prices rise slowly over time and have a consistent upward trend.
However, when you purchase something like Bitcoin each day you look at it, the price could be high or low. In 2020, we saw nearly $20,000, and a few days or fewer after the shutdowns, the price plummeted to $3,000. Many might look back and say, “I wish I had bought in right when it was at its lowest.”
But the problem is you can never know until after the event. Looking back, it is easy to say how well we should have done if we put all our money in Bitcoin right when it was its lowest. At the same time, you should be able to look at that and see what you could have never known. There was a real chance you put all your money in at $10,000 on the way down and then lost everything if you panicked and sold at $3,000.
What should we do when we can’t see into the future or travel into the past?
We should make small contributions to the investments we believe will do well. In amounts, we can afford over a long period.
Enter DCA.
If you had first heard about Bitcoin as many did in the 2017 Bullrun and had started putting a modest $5 a day into Bitcoin at the highest point of 2017, today you would have $46,663 (as of 4/22/2022 2 am CTS), assuming you never sold at any high points. You would have only invested $7,935 to achieve this.
This is a nearly 500% gain.
If you instead invested in Gold, your $7,935 would only be worth $9,198 (as of 4/22/2022 2 am CTS), and if you had chosen the DJI (Dow Jones Index), you would now have $9,906.
This is better than trying to time each market’s high and low points. I started to do this calculation but remembered some others had already done it Reddit poster u/jerschneid has made this nifty spreadsheet to break it down. Click here.
The post and the attached data show us that even if you hit the “perfect timing,” DCA investing still comes out ahead. This is because, at least, in this case, the compounding effect of your investment has a more significant impact than a perfect hindsight investment strategy.
You might feel like you know about DCA, but let me break things down and discuss some different ways you can approach this time-tested method.
Breaking Down DCA Strategies
The easiest thing you can do is find some automated method to get a DCA strategy working for you. I like hands-off things and use stuff like Coinbase, Acorns, and my bank to set up DCAs for me, which is a low effort on my part.
Another important concept to consider is it might be best if you have a set amount you will invest to break it up into smaller amounts and buy regularly.
You can set purchases or deposits up daily, weekly, or monthly. More frequently will do better, as we can see here:
DCA BTC – Dollar-Cost Averaging into Bitcoin
| Time | Freq. | Amt. | Result |
| 1 year | Daily | $5 ($1,825) | $2,144 |
| 1 year | Mon. | $250 ($3,000) | $3,647 |
| 5 year | Daily | $5 ($9,130) | $68,769 |
| 5 year | Mon. | $250 ($15,000) | $118,600 |
| 9 year | Daily | $5 ($16,435) | $1,476,455 |
| 9 year | Mon. | $250 ($27,000) | $2,479,161 |
DCA DJI – Dollar-Cost Averaging into the Dow Jones Index
| Time | Freq. | Amt. | Result |
| 1 year | Daily | $5 ($1,825) | $1,827 |
| 1 year | Mon. | $250 ($3,000) | $3,010 |
| 5 year | Daily | $5 ($9,130) | $11,796 |
| 5 year | Mon. | $250 ($15,000) | $19,497 |
| 9 year | Daily | $5 ($16,435) | $26,636 |
| 9 year | Mon. | $250 ($27,000) | $43,922 |
DCA Gold – Dollar-Cost Averaging into Gold
| Time | Freq. | Amt. | Result |
| 1 year | Daily | $5 ($1,825) | $1,809 |
| 1 year | Mon. | $250 ($3,000) | $2,970 |
| 5 year | Daily | $5 ($9,130) | $10,870 |
| 5 year | Mon. | $250 ($15,000) | $17,947 |
| 9 year | Daily | $5 ($16,435) | $21,360 |
| 9 year | Mon. | $250 ($27,000) | $35,130 |
How To Setup DCA on WeBull
I made a video about how to DCA on WeBull. I have another article I’m working on about buying Crypto on different platforms, and WeBull will be the first one I post about. So check out this video and how you can start using a Dollar-Cost Averaging strategy to grow your account and make investments.
How To Setup DCA CashApp
Coming Soon
How To Setup DCA Coinbase
Coming Soon