📕 Better Than Yesterday With BSCStation #14: Safe Invest During Bear Market Part 2
Welcome back with “Better than yesterday with BSCStation”. In the previous part, we have introduced what the Bear Market is and suggested some Invest Strategies for you to consider during the tough time.
Today, let’s kick it up a notch and analyze these investment strategies, starting with Dollar-Cost Averaging, also known as DCA.
What Is Dollar-Cost Averaging?
Investing can be challenging. Even experienced investors who try to time the market to buy at the most opportune moments can come up short.
Dollar-Cost Averaging is a strategy that can make it easier to deal with uncertain markets by making purchases automatic. It also supports an investor's effort to invest regularly.
Dollar-Cost Averaging involves investing the same amount of money in a target security at regular intervals over a certain period of time, regardless of price. By using Dollar-Cost Averaging, investors spread out their average buy price and limit the volatility’s impact on their portfolio.
In effect, this strategy eliminates the effort required to attempt to time the market to buy at the best prices.
Dollar-Cost Averaging is also known as the constant dollar plan.
How Dollar-Cost Average work?
With DCA, you decide on the total amount you wish to invest, along with your chosen investment product(s) cryptocurrency, NFT, etc. Then, you invest the money in smaller installments over a specific length of time.
You may place your DCA trades manually, or use automatic features to do it for you. Once set up, your purchases occur automatically regardless of asset price or movement in the market.
Why consider Dollar-Cost Averaging?
There are 3 main reasons to consider DCA, particularly during times of uncertain market conditions:
It can help you counter the emotional resistance you may feel to pulling the investing trigger—so you don't miss an opportunity for long-term growth.
It can be particularly effective through market volatility and down markets, when investors may be able to buy at lower prices.
It can help you make regular, consistent investing a habit that you stick to for the long term.
Of course, like any investment strategy, DCA can come with certain risks and drawbacks.
For one thing, DCA does not assure a profit or protect against loss in declining markets. It also involves continual investments in securities, so you should consider your financial ability to continue your purchases through periods of low price levels.
It also may not be the best approach for getting a lump sum invested into the market — for example, if you've received an inheritance, a bonus, or another large figure that you intend to invest. While a lump sum can be held in cash and then invested in increments, it can also be invested all at once, which carries more risk but may provide better returns potential (because any money you have sitting in cash will miss out on potential market returns).
Finally, it can be important to keep in mind the impact of any transaction fees. If you pay a commission or other transaction fee each time you make an investment, then dollar-cost averaging may generate higher fees than a strategy of less-frequent investments.
Is Dollar-Cost Averaging safe?
Dollar-Cost Averaging is a relatively safe way to invest, but there are always aspects to watch out for.
In any case, this way of investing suits long-term investors. As the market evolves from time to time, however, this strategy may not prove productive in the long run.
Despite the fact that you invest in a relatively safe way with dollar-cost averaging, you still have no guarantee of a positive return. That’s why you should always keep in mind that you can also lose your investment and never invest with money you can’t afford to lose.
How to start with Dollar-Cost Averaging?
Of course, it is really nice to understand how DCA works, but the most important thing is to apply the method. The most common way to apply DCA is to invest a certain amount of money in assets each month. This is because most people invest part of their salary and the salary is deposited on a fixed day.
To make the DCA method a personal plan, you need to determine a few things for yourself, namely:
For the DCA method, it is useful to choose a cryptocurrency that you expect to exist and increase in value in the future.
Besides how much and how often you are going to invest, it’s also important to decide how you want to do this. You can invest manually or automatically. By choosing a platform where you can invest automatically, you can effortlessly use the DCA method. This way, you can build up your crypto portfolio without looking back. Just realize that earning more crypto does not automatically mean more profit. When prices drop, your cryptocurrencies are worth less.
Conclusion
Many investors view market downturns as opportunities, and you can improve your chances of taking advantage with a dollar-cost averaging (DCA) strategy. The basic idea is that DCA gives you a chance to increase your holdings when prices are lower. Over time, the strategy reduces your cost basis or the average price you pay for each unit of an asset.
In conclusion, building in a crypto bear market using DCA strategies has been proven to be profitable because it takes advantage of the volatility and low prices and maximizes profits when the bull markets come. However, research is a part of achieving this. Remember to always DYOR before investing!
✨ During the Bear Market, staking BSCS tokens with enticing APY to gain guaranteed allocation for IDO projects on BSCStation Launchpad is a recommended safe investment option.
About BSCStation
BSCStation - The fully decentralized protocol for launching new ideas. An all-in-one Incubation Hub with a full-stack Defi platform across all main blockchain networks. We provide exclusive services including IDO/INO Launchpad, Yield farming, NFT Auction, Marketplace, and BSCSwap
BSCStation operates on top of all the main blockchain networks and is designed to offer maximum value to consumers and institutions.
BSCStation platform uses the Sharing Economy Model for the purpose of profit-sharing, helping users to access DeFi platforms in the easiest, safest, and most cost-effective way. BSCStation is the most convenient bridge to connect users and application products on all main blockchain networks.
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The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action.