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Navigating the Crypto Market: Buying the Dips vs Auto-Investing

Should I buy now, or should I wait a little longer? Almost everyone ponders this question. Of course, buying at the lowest price is ideal, but what does it take to time the market perfectly? 

Understanding Market Anxiety

The constant oscillation between "should I buy" and "should I wait a little longer?" is familiar to most investors. Market anxiety can be likened to a passenger's discomfort on a turbulent flight. The fear of financial loss or missing out on investment opportunities can instigate this. Understanding this sentiment is the first step towards managing it effectively. Deciding when to invest is often a perplexing task. While buying at the lowest price is ideal, timing the market perfectly is not feasible. 

Perfect Timing vs Dollar Cost Averaging 

An analysis of the Dow Jones Index over the last 50 years shows that perfect timing yields only a 22% better return than stress-free, daily dollar cost averaging (DCA). DCA is an investment strategy where you invest a fixed amount of money in a particular asset at regular intervals, regardless of the asset's price. Read the full article here.  

Analysis of the Dow Jones Index comparing timing the market and dollar cost average
Analysis of the Dow Jones Index comparing timing the market and dollar cost average

The central tenet of DCA is the minimisation of the impact of market volatility. Instead of trying to time the market to make a lump-sum investment, you split that sum into smaller chunks and invest them over a specified period. This approach results in purchasing more units of an asset when prices are low and fewer units when prices are high.

DCA is a powerful strategy to consider when investing, especially in the volatile world of cryptocurrencies. It not only helps to alleviate the stress and anxiety of market timing but also instils a disciplined, long-term investment approach. With SwissBorg's Auto-Invest feature, implementing DCA has never been easier. As we navigate the world of investing, DCA can be an essential tool in our arsenal, helping us move closer to our financial goals at a steady, consistent pace.

Does it apply to crypto too?

The good news is that we had a look at Bitcoin, and the results confirm the analysis. The experiment on Bitcoin from 2016 to 2022 (peak of the last bull run) shows that timing the market only outperforms Auto-Invest (DCA) by 17%. However, these percentages can vary depending on the date of investment.

DCA vs timing the market
DCA vs timing the market
Bitcoin DCA: open price and minimum future price
Bitcoin DCA: open price and minimum future price

While timing the market could offer slightly higher returns, it requires a level of foresight that we do not possess. Therefore, a positive trend in markets makes the timing of investments less critical. The focus should be on consistent, long-term investments.

Enter Auto-Investing

This feature allows you to invest consistently at regular intervals, acting as an autopilot for your investments. Auto-investing offers a remedy for market anxiety, promotes consistent investing, and introduces the benefits of dollar cost averaging. By investing a fixed sum regularly, you end up purchasing more shares when prices are low and fewer when they are high. This approach can lead to a lower average cost per share, resulting in better returns in the long run.

Most importantly, auto-investing diminishes the emotional factor in investing. It helps prevent impulsive actions spurred by market fluctuations and encourages portfolio diversification, spreading your investments across various assets. Such diversification can further ease market anxiety by reducing risk and potentially enhancing returns.

In a world marked by continuous market volatility - especially in the crypto market where volatility is most pronounced- auto-investing is a pillar of stability. It helps navigate the highs and lows of the market, making your investment journey less stressful and more directed towards achieving your long-term financial goals. In the era of advancing technology and the rise of robo-advisors, the ease and effectiveness of auto-investing are bound to increase, helping you manage your investments and alleviate market anxiety.

The perfect time to invest might not be a specific date or price point but a consistent, long-term strategy that auto-investing supports. The stress of timing the market and the fear of financial losses could be significantly reduced with auto-investing, making it a worthwhile consideration for your investment approach.

The SwissBorg Solution

The SwissBorg app, with its Auto-Invest feature, is an excellent tool for implementing a DCA strategy. It allows users to select their preferred assets for long-term investment and set up an automated, recurring investment plan. Whether daily, weekly, bi-weekly, or monthly, SwissBorg's Auto-Invest feature can provide long-term exposure to a growing market while minimising the risk of ill-timed, hefty investments.

How to Use SwissBorg’s Auto-Invest:

  1. Download and register in the app.
  2. Go to Auto-Invest from the Invest tab.
  3. Choose the asset(s) you want to invest in long-term. (For me, this is the CHSB token!).
  4. Select how often you want to invest: daily, weekly, every other week or monthly.
  5. Choose the source of funds for your investments.
    Tip: If you plan to use a fiat currency, you can automate a monthly bank transfer to the SwissBorg app each month after you get paid to be sure your account is adequately funded for recurring investments.
  6. Define a specific sum you want to invest. Look long-term, for at least six months. This should be an amount you can afford after your essential expenses are covered.
  7. Reap the benefits of long-term exposure to a growing market, reducing the risk of investing too much money at the wrong time.

Happy Investing! 

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