Dollar-Cost Average and Diversify Savings and Investments
To dollar-cost average is a simple technique of investing a fixed amount of money in the same asset(s) or investment(s) every month, or week, or year over a long period of time.
A dollar-cost averaging example:
Let us say that you have long term savings of 10000 USD and you are quite sure that the dollar inflation will mean losing value over the next 30 months compared to certain assets like bitcoin, gold, silver, S&P 500 stocks and commodities like soy beans or corn, but you don't know if these other investments will increase in value in the medium term, like 3-12 months.
Dollar-cost averaging here could be dividing 10000 by 30 (or 20 or 10) and investing some each month.
Dividing by 30 equals 333 USD, and then, for the next 30 months, you would buy assets for 333 USD.
Now, if these assets prices should go down the first 3-12 months it is good for you in the way that you are only losing value on a small part of the money you are planning to invest, while you are now keeping buying more assets at lower prices every month.
Once the assets are back at the price where you started buying you will already be at a good profit and in 30 months, if you have kept buying and the price is now higher, like you thought it would be, then you have a really good profit.
Sometimes, if the value of the assets go up right away in the first months, you will lose compared to going all in at once, since you now need to buy at a higher price, and sometimes, if the value goes down first for multiple months, you will gain money compared to buying all at once.
The main benefit of dollar-cost averaging is that IF the price goes down initially then you have less anxiety and regret, since you now buy cheap and only lost value on a small part.
Also, IF the price goes up, you don't panic buy with all your money out of fear of missing out, just to see the price go down again and panic sell at a loss before the price goes up again.
Investment diversification means to lower the concentration of risk by investing in more than one asset.
A diversification example follows below.
If you are unsure which asset will go up most in price and even which will go up in price and which will go down, then you can diversify, meaning, you spend different parts of your savings on different assets and investments.
Please note that the diversification example below is not an investment advice in terms of how many percent one should have of each, but just an example of diversification that may create a much lower risk than betting everything on one or two investments.
In hind site in the last 10 years it has been much more profitable to keep a higher percentage of Bitcoin, Ethereum and Litecoin and those who held 50-100% of that in the last 10 years and did not lose it are no financially free, but many also lost their crypto and the last 10 years does not guarantee that the next 3-10 years will be the same.
This is why our example below covers more bases and is more conservative with a lower risk, which should offer less of a roller coaster in value but also a lower reward than holding only that asset that will perform the best.
10% BItcoin
5% Smaller crypto currencies like Ethereum, Litecoin, Tixl, BNB, Matic, XRP, Chainlink
10% S&P 500 Stocks like Microsoft, Amazon, Apple Netflix, etc.
5% Smaller stocks
10% Certificates following the value of commodities like Coffee, Oil, Sugar, Soy Beans, Natural Gas etc.
15% Currencies like USD, Swiss franc, Japanese Yen
15% Land and real estate
10% Gold
10% Silver
10% Collectibles, art, rare clothing, sneaker collections
What is quite clear and safe to forecast is that the example above will be worth multiple times more in 10 years compared to owning only USD or other government currencies with inflation.
Most people with little money are the ones who hold only government currencies, which is why we find it important to educate people on this.
But it is also considerable how much good could be done in the world if all moderately wealthy people invested right and used a small part of their wealth growth and influence to inform and educate others.