How to invest when the market is volatile

Investing Strategy
May 23, 2022

I ain’t afraid of no bears 🐻

Lately, we’ve heard the word “bearish” being used a lot to describe the market. A bear market is when a market declines over a sustained period of time. Currently, some experts are saying we’re already in the bear market territory both in crypto and traditional markets. While there’s no set time on how long a bear market can last but some experts predict the current bear conditions to last for several months.

But what does that mean for investors? Should you stop investing? No! It means this is the perfect time to explore different investment strategies, especially those that can bring value in the long term.

Slow and steady 

Market volatility can often seem scary for those starting out on their investing journey. However, by looking long term and understanding different investment strategies, you can tame both the volatility and a bear market. One of the most popular strategies for long term investments is “dollar-cost averaging”, or DCA for short. 

The idea is simple: consistently invest the same amount of euros (or any currency) in an asset. Sometimes you’ll get more for your investment, sometimes less depending on the market conditions. Over time you can average the cost of your investments. It’s a slow and steady strategy commonly used across all markets, from crypto to commodities, to manage risk when investing. 

The good bits of dollar-cost averaging 

💡 Simple and suitable for any investor - beginner or advanced 

💪 Any size budget can use this strategy

💰 Helps you manage the risk of buying too many assets straight away from a high price

🧠 You only have to make several decisions upfront, then just follow your plan

😎 Lessens the impact of the emotional side of investing - buying high and selling low - by giving structure to your investments 

Like every strategy, dollar-cost averaging has its limitations and downsides

🌟 Investment strategies aren’t a magic wand, DCA can’t guarantee you profit 

🔔 It’s a slower and safer strategy. Everyone has their own risk appetite and this pace might not be suitable for everyone.

🚀 Markets have a tendency to go up eventually. In this case, your earnings could be greater if you’ve invested a big amount earlier rather than several smaller sums over time.

🔍 More transactions can equal more fees. Unless, of course, you’re investing in Bitcoin with Change 😎

Make it work for you 

If you want to try this strategy out, there are three decisions you’ll need to make.

1) How much money are you willing to invest? 

2) How often are you going to invest? 

3) What are you going to invest in? 

What does dollar-cost averaging look like in practice?

Say you have €400 total to invest. You’ve decided to invest €100 into Solana (SOL) at the start of each month. Depending on the market, SOL’s price could vary greatly, so the amount you receive from your €100 will be different every time. 

Here’s an example of your track record👇

Now for some math 🤓

Your total investment over four months: €400

Total SOL bought: 4.306 

The average price you paid: €92.894 

So, here you’d end up with 4.306 SOL, with an average price of €92.894. If you had bought the same amount of SOL for the initial price of €97.77, you would have overpaid by €21. And, if you’d invested in the same amount of SOL on April 1, you’d have to overpay $125.33! 

While the Change team can’t provide financial advice, we’re always looking for ways to help make wealth creation accessible for all. Want us to explain more strategies? Reach out and let us know at [email protected]

Good luck taming the bear market, Changemakers!

Disclaimer: The information provided in this article doesn’t qualify as financial advice. Its purpose is strictly educational.