13/11/2022
Crypto Investing – Hope is not a strategy but Dollar Cost Averaging is!
I started in outside B2B sales over 25 years ago long before we had smart phones and apps to tell us where to go and remind us what to do. My first manager was hardcore and lead a group of twenty somethings Monday thru Friday on the journey of sales. He always had a one liner to get us motivated by making us laugh but ultimately to teach us a lesson. I remember there was always one particular line he would say if it was approaching the 9:00 hour and our motley crew didn’t have our day planned out. He would say “Hope is not a Strategy.” I use to laugh and head out to the field thinking I have a strategy hit my quota. Years later I realized that small one line had such a big meaning not only in sales but also investing but really just about everything but let’s stay on the investing part because that’s what you’re here for.
What is Dollar Cost Averaging (DCA)?
Dollar cost averaging or (DCA) is a strategy of purchasing an investment in which the investor spreads out their purchases so that the total price paid has no correlation with market timing, events, or emotion. Things that can even challenge the most experienced investor. You simply invest the same amount of money at the same time intervals regardless of price. Sometimes whatever your buying is on sale sometimes it’s not but regardless the investment is made.
If you participate in your employer’s 401(k) or similar type program you are already dollar cost averaging. Think about it, the investment is made every time you get paid regardless of the market and it’s probably right around the same amount or percentage each time you get paid. Congratulations your using the power of DCA!
What are the benefits of Dollar Cost Averaging?
• The average amount you spend on investments can be reduced through dollar cost averaging.
• If done properly you can automate the process basically a set it and forget model taking out emotions or (FOMO) Fear of Missing Out.
• It supports the habit of consistently investing in order to accumulate wealth over time
• DCA completely removes trying to time the market or “catch the falling knife”
• It’s a strategy that you can use time and time again for all types of investments
• It can be used with new or seasoned investors if time or any other reason you need to automate
• You can always pause, stop, or pivot if needed for whatever reason so it’s flexible and fluid
Why use Dollar Cost Average in the Crypto market?
Cryptocurrency in my opinion is the crown jewel for dollar cost averaging. It’s a market that never closes and it can change literally in an instant. How many times have you gone to bed and woke up the next morning only to find out that Bitcoin spiked 20% and you forgot to buy or the other side of the “bitcoin” and you bought only to find out it dropped 30% and you’re like why didn’t I wait. Guilty as charged on all counts. Dollar cost averaging although can’t stop those sleepy bad decisions definitely makes you feel better because if you’re a DCA investor the ups and downs aren’t as emotional or really even noticed. You almost become numb because you know at noon your buying $5 worth of bitcoin everyday regardless of price and it’s only 5 bucks. It’s less than a latte from my favorite mermaid. Whatever. I’m going to bed.
How I Dollar Cost Average?
There are many platforms that offer some type of DCA service. The only downside of dollar cost averaging with crypto investing can be the fees especially if you buy daily like I do. I have found a work-around option. I use Robinhood for both crypto, ETF’s, and stocks that I buy on the regular. It’s simple to set-up and there are zero fees. So, if you want to buy $1 a day of Bitcoin you get a $1 of bitcoin every day. I actually buy $5 everyday 7 days a week at high noon…makes me feel like a gunfighter.
Robinhood connects right to your bank account so if your unfamiliar with crypto wallets and the blockchain that won’t be an issue yet. Once you accumulate enough to be concerned and understand the phrase “Not Your Keys - Not Your Crypto” you can transfer to a cold storage wallet such as a ledger to store offline but that’s an article for another day. Really, I’ll write an article about that soon.
I hope this article at the very least gets you thinking about your strategy and using time as leverage rather than emotion. Always remember - Hope is not a strategy!
Here is my referral link for Robinhood if you would like to explore the platform. If you sign up we both get to pick a fractional stock reward usually $5 to $10 …free latte!
Link: join.robinhood.com/quintok1
Please note that this is not financial advice just sharing my investment journey. I am not a registered investment, legal or tax advisor or a broker / dealer. All investment financial opinions expressed here are from my personal research and experience and are intended as educational material only. Please do your own research. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended error and misprints may occur. I have personally invested with Robinhood.
For the latest news and headlines for all things crypto visit www.iqcryptonews.com
