Nikolas Sargeant
In the realm of fluctuating markets, navigating the complexities of timing poses a formidable challenge for even the most seasoned investors. The solution lies in the cost-averaging method, offering a strategic approach to investment.
With the Recurring Buy feature, individuals can reap the benefits of cost averaging while maintaining complete flexibility and control over their investments. This blog provides comprehensive insights into the concept of cost averaging and details the range of assets available for implementing this strategy.
Understanding the Cost-Averaging Strategy
The cost-averaging strategy is an investment approach that involves consistently investing a fixed amount of money over a specified period, regardless of market fluctuations. It eliminates the necessity to time the market by spreading out investment purchases, thereby achieving an average purchase price. Another advantage of this strategy is the ability to steadily invest smaller amounts over time, mitigating the need for a substantial one-time investment.
Mechanics of Cost Averaging
When individuals choose to invest, they can opt for a Lump Sum Investment strategy, involving a one-time investment of a specific sum, or continuously invest smaller amounts over time. Two illustrative examples bring both strategies to life.
Lump Sum Investment Strategy
Suppose an individual intends to invest €3,600 in the upcoming year and decides to allocate the entire sum at once. If the assets to be purchased are priced at €40 each, this results in the acquisition of 90 assets in a single transaction.
Cost Averaging Strategy
In this scenario, the individual also plans to invest €3,600 in the coming year but chooses to spread the amount evenly over 12 months, resulting in a monthly investment of €300. As the asset's price fluctuates over time, the purchase price is averaged, reducing risk.
Bitvavo's Recurring Buy
Commencing with as little as €5, individuals can set up a weekly, fortnightly, or monthly Recurring Buy at Bitvavo. This feature allows easy adjustments to the investment amount, the ability to skip or cancel a Recurring Buy execution as needed, and the creation of multiple plans tailored to individual financial goals.
Eligible Assets for Recurring Buy
Bitvavo initiates its Recurring Buy feature with ten different digital assets, with plans to introduce more in the future. The initial assets available for cost averaging include Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Ripple (XRP), VeChain Thor (VET), Solana (SOL), Litecoin (LTC), Chainlink (LINK), Polkadot (DOT), and Cosmos (ATOM).
H2 Setting Up Recurring Buy
For those interested in setting up Recurring Buy for their Bitvavo Account, comprehensive information on the process can be found here.
