When I started investing, I tried to predict the market. Buy, sell, constantly check my position, waiting for the perfect moment.
I made money on some trades. But I paid commissions. I wasted time. And most importantly: I didn't earn as much as I would have if I'd just left it alone.
Then I changed everything. And I discovered something that revolutionized my approach to investing: DCA (Dollar Cost Averaging).
Today I'll tell you why I think it's the best strategy. Not for everyone. But for people like you who are just starting and don't want to overcomplicate things.
What is DCA (and why it seems too simple)
DCA is brutally simple: you invest the same amount regularly, regardless of whether the market goes up or down.
Here's what I do: I reserve 25% of my monthly salary. Every month, automatically, that amount gets invested. Done.
I don't try to "wait for the dip." I don't try to "buy at the top." I simply: automate and forget.
And here's the interesting part: it works better than trying to be clever.
The problem with "waiting for the perfect moment"
We all think we can predict the market. But nobody can.
You see the market at highs and think: "I'll wait for it to drop before I buy." Then it drops. You think: "Perfect, now I buy." But it drops more. You think: "I'll wait a bit longer."
And then... it goes up.
And you missed the entire dip because you were waiting for the bottom that never came.
That's market timing. And it kills more investors than anything else.
With DCA, you're protected from this. If it drops, your monthly contribution buys cheaper. If it rises, you buy less quantity but you're in. You neither win nor lose on timing.
My approach: even with initial money, I use DCA
Here's a secret most people don't use: DCA isn't just for monthly contributions.
Imagine you have €3,000 you want to invest right now. Most people would do it all at once. I wouldn't.
I'd divide that €3,000 into chunks and invest gradually over time. How many chunks? I'm not 100% sure, but probably 6-10 tranches over several months.
Why? Because even that initial money is subject to volatility. By splitting it, I reduce the risk of "coincidentally" investing the day before a 20% drop.
The psychological benefit (which is more important than you think)
Here's what really matters.
DCA doesn't just protect you mathematically. It protects you psychologically.
When you do trading (buying and selling constantly):
- You check the app all day
- You stress out when it drops
- You're tempted to do something impulsive when prices fall
- You sell when you shouldn't
With DCA:
- You set automation and forget it
- You check once per quarter
- Drops feel like "bargain opportunities" for your monthly contribution
- You never act on emotion
I personally avoid checking the app constantly. Even though it's tempting. Because every time I open it, I want to do something. And doing something is worse than doing nothing.
The myth of quick big gains
"But Raúl, don't I make more money by constantly buying and selling?"
In the short term, maybe. Some trades will work out well.
But long-term (10-20 years), DCA beats trading in 99% of cases.
Why? Because you don't pay commissions, you don't make emotional mistakes, and you simply let compound interest do its magic.
Trading is a zero-sum game: someone wins, someone loses. The casino (the broker) always wins commissions.
DCA is a game where everyone wins: you grow at the market's speed, without friction.
Why it's the best strategy "for you"
I want to be clear: DCA is the best strategy for people who are starting out.
For people who:
- Don't want to spend hours analyzing
- Don't want to stress about checking prices
- Have a stable job and predictable salary
- Want consistent results without drama
If you're an experienced trader with 10 years of proven systems, you might have other paths.
But if you're 20-30, have a normal job, and simply want to grow your money: DCA is your best friend.
How to implement DCA in 3 steps
Choose a fixed percentage or amount. I use 25% of my salary. You can use €50, €100, €300. Whatever fits your budget.
Automate it. Set up an automatic monthly transfer from your bank to your broker. That's IT.
Forget it. Don't check it weekly. Review every 6 months if you want. But not more than that.
That's DCA. Simple. Effective. No drama.
The conclusion you were looking for
DCA won't make you rich fast.
But it will make you rich for sure.
While others stress out trying to predict drops, you're calm knowing your strategy works in any market.
And that, long-term, beats any lucky shot.