- Reading time: 4 mins 31 secs
Introduction
If you are new to investing, you will soon come across a strategy known as The Dollar Cost Average (DCA).
If you are already learning about investing through stock market courses, you will have studied DCA by now.
And of course, if you are a seasoned investor, you are probably using the DCA.
In fact, most investment funds use the DCA.
Investors use it because it’s a very simple strategy and it can make up to 5% returns per year, on average.
It’s a monthly strategy and involves investing the same amount of money no matter if the price is high or low.
But it is strictly tied to the US dollar.
That’s great.
But here at Investment Mastery, we’ve taken the DCA one step further and created our own version.
We call it the Price Cost Average strategy and it’s basically the DCA – on steroids!
So, if you want to be enjoying the principles of the DCA but make 9% profit on average per year, then read on!
In The Beginning…
The DCA strategy actually started out as “The Buy, Hold & Pray Strategy.”
To be honest, many investors actually still do this, more so than the DCA.
But the Buy, Hold, Pray technique is simply not effective.
This involves doing nothing basically and looking at your investment once a year. You look and the price has gone down.
You’ve actually lost money because you buy, you hold and you pray that it will go up. But what if it doesn’t? You don’t know. You don’t have a crystal ball.
Immediate disappointment. You feel like giving up.
Believe it or not, this is the strategy most people use out there today.
The DCA is a modification of this Buy, Hope, Pray strategy.
So What is The Dollar Cost Averaging Strategy?
It’s world famous for starters because it is used by most investment funds and private investors.
They invest the same amount of money every month, no matter if the price is high or low. They only use the US dollar.
As stated earlier, the aim is to make up to 5% per year on average using this strategy.
So, okay, the DCA does work. But what if you could do even BETTER than that?
Welcome to…
The Price Cost Averaging Strategy (PCA)
It’s the DCA but on steroids, and here’s why.
Our PCA Strategy is a monthly strategy with one big difference from the DCA – you invest only if the price is lower than the previous month.
And not only that, we are also aiming to invest more if the price keeps falling and you can do this in any currency.
Because why limit yourself to dollars?
Maybe you have pounds. Euros. Japanese yen. It doesn’t matter.
The PCA is still a simple strategy like the DCA, but again the big difference is the PCA brings in higher returns in comparison to the DCA.
As much as 9% per year.
Here’s How the PCA Works
The crucial aspect of the PCA is that we only invest if the price is lower than the previous month.
Plus, we don’t invest the same amount if the price is high or low.
No. No. No.
We invest more money if it keeps falling.
That’s the beauty of this strategy.
Because in effect the cost of your investment is LOWER every time.
Because buying more when the price is lower means the average price is LOWER.
That equals MORE PROFIT to you, in effect.
Price Cost Averaging Strategy Rules
#1 First off, you must always have:
3-5 uncorrelated assets.
So that could be gold, silver. Cryptocurrencies. It could be oil companies, retail companies, tech companies. Whatever area you feel strongly about, and of course, done your research on.
#2 Wait for a 20% drop before investing the first time
#3 Invest more if the price is falling compared to previous month
#4 But we DO NOT invest if it has risen since it brings up your average price
#5 Instead, we invest in a DIFFERENT asset because usually when one asset goes up, the other goes down
Donc…
To Recap:
So that could be gold, silver. Cryptocurrencies. It could be oil companies, retail companies, tech companies. Whatever area you feel strongly about, and of course, done your research on.
Dollar Cost Average (DCA)
- is a simple strategy used by many funds/investors
- monthly strategy
- the same amount is invested every month no matter if the price is high or low
- only USD is used as the investment currency
- up to 5% a year returns on average
Price Cost Averaging (PCA)
- The Price Cost Averaging (PCA) Strategy is a simple strategy that brings in higher returns in comparison to the DCA strategy
- monthly strategy
- Invest only if the price is lower than the previous month
- Invest more if it keeps falling
- Invest with any currency
- Makes an average of 9% profit per year
The great thing about our PCA strategy? We actually have an interactive automated calculator to help you set-up different PCA investments!
If we say so ourselves – it’s awesome!
Here’s what it looks like:
The PCA Calculator
And you can download it for FREE when you subscribe to IM Insider here
You can also make use of our equally awesome:
If you don’t know already, the “miracle” of compounding interest is exactly that – a miracle of mathematical nature!
Use it in tandem with the PCA calculator and you really can see how your wealth can grow exponentially, even with £100 invested each month.
Conclusion
So there it is.
There are three choices.
You can choose between the “The Buy, Hold & Pray Strategy.”
The Dollar Cost Average strategy.
Or go ONE better and use the Investment Mastery PCA Strategy making up to 9% returns per year instead of 5%.
We know what we would choose (if we weren’t already using it!)
And don’t forget:
When you subscribe to IM Insider, you can access our short video course on the PCA Strategy.
Plus our two very handy calculators – the compounding interest calculator and our PCA calculator.
While you’re at it, you can also download our Money Management Calculator.
So, three for one and it’s all FREE.
