Investing can be an emotional roller coaster. While some volatility can be appealing to experienced traders, it can be frustrating and even intimidating to people who just want to add Bitcoin or other digital assets to their portfolio. When is the right moment to buy? Now? Next week? Or did you already miss the train because you didn’t buy last month? To avoid those doubts it’s a good idea to follow a disciplined approach with regular investments over time. The strategy behind this approach is called ‘cost averaging’ and in this post you’ll learn what it is and how it works.

The general idea is that instead of investing the whole amount (lump sum investment) you stretch the investment out over a longer period of time and invest smaller amounts regularly.

What is cost averaging?

‘Cost averaging’ is a popular investment strategy where you take short term emotions out and instead focus on a long term approach. By constantly acquiring an assets you are able to smooth out market volatility. When you buy an asset on a weekly or monthly basis, you are less dependent on short term price fluctuations. The general idea is that instead of investing the whole amount (lump sum investment) you stretch the investment out over a longer period of time and invest smaller amounts regularly.

The key takeaway here is: You buy more shares when the price is low, and fewer shares when the price is high. With cost averaging you don’t have to worry about price movements and can invest strategically over a long timeframe. The longer you invest in a specific asset, the closer you get to the average price of the asset.