Dollar Cost Averaging and diversification: a winning combination?
Cyborg
Community member
We all know that Dollar Cost Averaging (DCA) and diversification are two of the most important strategies for a strong portfolio, but what if you could combine both to make something powerful? For many, this is a resource-intensive task, requiring manual work and energy-intensive due diligence. Fortunately, automation is never out of reach at SwissBorg. With market-leading products like Auto-Invest and Thematics, integrating both strategies has never been easier. But first, let’s take a step back and review why exactly DCA and diversification are key strategies for your portfolio.
What is Dollar Cost Averaging?
Dollar Cost Averaging (DCA) is a tried-and-tested investment strategy where an individual distributes their total investment over periodic purchases of a target asset, reducing the impact of market volatility. Instead of aiming for the perfect market entry point, investors purchase at consistent intervals, regardless of asset price fluctuations.
DCA versus Market Timing: Which is best?
Predicting future market prices is arduous, making market timing immensely challenging. Even if one were to hypothetically time the market flawlessly every time, research indicates that the long-term difference between DCA and impeccable market timing is minimal, as depicted in the image below.
Diversify and stay agile with Thematics
Diversification is a cornerstone of successful investing, and Thematics allows you to do precisely that. With Thematics, you can:
Instantly Diversify: Invest in a bundle of tokens with just a single tap, providing a diversified exposure to multiple assets.
Active Management: Thanks to the reallocation features, Thematics adjusts the asset composition based on prevailing market trends, ensuring your investments are always aligned with the market's pulse.
Automatic Rebalancing: Thematics also incorporates rebalancing, executing automatic sell and buy orders to maintain each token's desired allocation inside the bundle, ensuring your portfolio remains optimised.
The importance of diversification
Diversifying one's portfolio allows an investor to distribute risk across multiple assets. This means that if one asset takes an unexpected downturn, the potential loss is limited. Conversely, the same principle applies if an asset significantly outperforms the rest. Overall, investing in a collection of tokens offers a distinct approach compared to selecting a singular asset.
The graph below illustrates the performance of the S&P 500 in comparison to some of its individual components starting from mid-2019.
Spotlight on SwissBorg's Best Blockchain Thematics
One standout example of a thematic to apply DCA is SwissBorg's Best Blockchain Thematics. Comprising the most promising blockchain tokens, this thematic offers investors an opportunity to capitalise on the blockchain revolution.
By setting up a DCA strategy into the Best Blockchain Thematics using Auto-Invest, investors can spread their investment over time, potentially benefiting from both the growth of the blockchain sector and the advantages of DCA.
Conclusion
Investment strategies come and go, but Dollar Cost Averaging has stood the test of time. With SwissBorg's cutting-edge products like Auto-Invest and Thematics, investors can elevate their DCA game, tapping into diversified assets and benefitting from active portfolio management. Whether you're a seasoned trader or just starting, SwissBorg's offerings can help you navigate the crypto landscape with confidence.
