Dollar Cost Averaging

Everyone has heard about it, most people have a pretty good idea about how it works, but only a few people have really looked at how exactly it achieves better results than almost any other market timing method... with the notable exception of clairvoyance of course.

The most important characteristic of dollar cost averaging is the extra "oomph" it can give your investing results in a volatile environment. When prices are low, you can buy more of the item you are investing in, and when prices are high you buy less. That means you will end up with more of the commodity than if you just invested in the item at the beginning of the period, especially if there is a lot of price swings along the way. In fact, when one considers the precious metals moves over the last several years, it has been an outstanding way to approach the markets.

Using a real-life example, we will show you how a disciplined DCA based approach over the last year generated a 13.1% better return than an initial investment of the same amount.

This is the actual transaction record of one customer from June of 2011 to May 2012. The customer spends $125 per month, and buys Amark Silver 1 oz rounds, and her check arrives around the 1st or 2nd every month. The amounts are taken directly from the monthly invoices.

The price per ounce shown is the cash pricing on the invoice that she paid each time.

Date Cost Ounces
Jun 2011 $42.32 2.95
Jul 2011 $39.58 3.16
Aug 2011 $43.76 2.86
Sep 2011 $46.88 2.67
Oct 2011 $33.27 3.76
Nov 2011 $37.56 3.33
Dec 2011 $35.06 3.57
Jan 2012 $30.78 4.06
Feb 2012 $37.08 3.37
Mar 2012 $38.10 3.28
Apr 2012 $36.64 3.41
May 2012 $33.84 3.69

Over this 12 month period she spent $1,500 and purchased 40.11 oz of Amark silver rounds.

If instead she had just purchased $1,500 in Amark rounds on June 1st, 2011 (at the price then of $42.32 per ounce) she would have 35.44 oz of silver (if we could actually sell 0.44 oz that is).

As 40.11 less 35.44 is 4.67 oz, or 13.17% more silver.

There are more references online that attempt to show the advantages of dollar cost averaging, as well as a lot that try to argue it is overrated. Certainly for something that constantly goes up that is true, but volatility is your friend with dollar-cost-average investing.

I hope this real-world example has shown you how it can make a difference, and has significant advantages for investing in precious metals.

Now, don't you want to go to the Gold Purchase Plan or Silver Purchase Plan page and sign up?