21 Jan 2022 | Edukatips

Dollar Cost Averaging Strategy and Benefits

In investing, each investor has different strategies, that are influenced by the availability of funds, time availability, risk tolerance, level of knowledge or experience in investing. One strategy that can be applied to investment, especially in Mutual Funds is Dollar Cost Averaging (DCA). Where, DCA is a strategy to set aside income regularly with the same nominal periodically to be invested, for example every month, regardless of the NAV (Net Asset Value) price. In an easy and short way, an investment strategy similar to saving, whatever the conditions, keep saving the same amount. There are several reasons the DCA strategy is a favorite, for example:

  1. The DCA strategy reduces the volatility of mutual fund investments.
  2. The DCA strategy can be seen as a form of installments on mutual fund investments.
  3. DCA is a simple strategy and quite appropriate for novice investors because there is no need to determine the right time to invest.

Some of the benefits of the Dollar Cost Averaging Strategy

#Starting with A Small Capital

With DCA, you can invest in stages so you don't need to prepare large amounts of funds at once to invest. You start investing as early as possible because this investment does not require a large capital.

#Reduce Risk

By investing in stages, this will provide long-term returns. If the price goes up you don't have to worry, even if you get a value / number of units that are less than previous purchases on average, because this DCA strategy can help to reduce market risk in the long run.

#Stay Disciplined

The key to the DCA investment method is discipline. This method is recognized as quite good because it is able to prevent investors from anxiety and panic. DCA provides a simple way to deal with these emotional problems. By investing gradually and with discipline, DCA has less risk for the same timeframe. In practice, you can stay calm in the face of volatility for long-term investments.

#Stay Focus

Emotional attitudes can cause delays in decisions, for example during extreme market movements. This can also be observed especially when the market weakens which continues to decline, usually we are more pessimistic during this period and it is difficult to stay invested, besides that we usually tend to believe that the current price decline will continue in the future. Therefore, DCA helps you to invest continuously on a regular basis so that you can stay focused on your investment plans / goals.

Learn and understand the strategies and benefits of DCA before investing with that strategy. For those of you who have not started investing, you can start with this concept which will be easier to implement because we only need to be disciplined in setting aside fixed investment funds. If we apply this concept in the long term, then we can start meeting the needs of the future from now on. As the saying goes, little by little, gradually becomes a hill.

Start investing early, with regular investments can be started via the myBCA application on the Welma menu with the Periodic Mutual Fund Purchase feature. Happy investing!

Written by : Abraham Ara, Head of Distribution and Marketing -- Eastspring Investments Indonesia


Mutual Fund is a product of the capital market and not a product of PT Bank Central Asia Tbk. (BCA) and BCA are not responsible for any claims and risks related to the management of the Mutual Fund portfolio. Investments in Mutual Funds are not part of third party deposits with BCA so they are not guaranteed by BCA and are not included in the scope of the object of the government guarantee program or deposit insurance. BCA only acts as a selling agent for Mutual Funds. Investment in Mutual Funds contains risks that allow investors to lose part or all of their invested capital. Mutual Fund's past performance is not a guarantee of future performance. Prospective investors are required to read and understand the Mutual Fund prospectus before deciding to invest through the purchase of Mutual Fund participation units.

PT Eastspring Investments Indonesia has obtained a license as an investment manager from the Financial Services Authority (OJK) and is supervised by the OJK in carrying out its business activities.