What are the advantages of using a dollar cost averaging strategy?
The main advantage of the dollar-cost averaging strategy is that it reduces the risk of taking risks at the wrong time; This is because choosing the wrong timing to enter the market is one of the most difficult tasks when it comes to trading or investing. Often times, even if the trend is correct in terms of the trading idea, the timing may not be right – which prevents the success of the entire trading process. Here, the dollar-cost averaging strategy helps reduce this risk.
If you divide the investment into small batches, you will likely get better results than investing the same amount in one large batch. Unexpectedly, it is easy to make a purchase at the wrong time, and this may lead to unsatisfactory results. Most importantly, you will be able to reduce some of the biases when making a decision. Once you apply dollar cost averaging, the strategy makes the decisions for you.