What is dollar-cost averaging? | Investing Nugget

What is dollar-cost averaging?

Dollar-cost averaging involves putting a fixed sum of money into a particular investment at regular time intervals, usually on a monthly or quarterly basis with the aim of smoothing out the impact of market fluctuations over time.

At last, it’s Friday evening. You shut down your computer and head to your favourite family-owned pub excitedly. Since graduating 5 years ago, you and your gang hold weekly TGIF huddles there to unwind. 

One reason why you love hanging out at the pub is the jovial yet eccentric pub owner. He is well-known for giving random discounts for his beers according to his mood. During the birth of his first grandchild, he gave everyone 15% off. When his wife recovered from COVID, he declared a 30% discount. 

That said, the man still needs to make a living. Other times when nothing much happens, prices would remain as stated. On rare occasions, the price does increase. For example, that time when there were hiccups at the brewery that supplied his beer. 

After tracking your expenses at the pub for the past year, you’ve made a discovery. You’ve spent slightly less for each pint of beer as compared to the official price stated! It must be those random discounts. You feel slightly bad for the elderly pub owner but realise that he will probably make up for the losses with slightly pricier beers in the near future.

How does dollar-cost averaging work and how does it benefit me?

Dollar-cost averaging in investing is just like ordering a pint of beer weekly, rain or shine, when there are discounts, price hikes, or no changes to the price. An investor invests a fixed amount of money regularly, despite the rise and fall of market prices. 

The purpose of this investing technique is to smooth out the cost of investment and maximise risk-adjusted returns over time.

How so? 

Just like how buying beer at various price points eventually evens out its average price per pint, over time, this method helps to grow your money more steadily than you would if you were investing a lump sum, especially when market volatility (ups and downs in the market) picks up. 

Such an investing technique can also help you take advantage of market volatility by increasing your investments at discounted asset prices (buying more when prices are low). 

Dollar-cost averaging prevents emotions from clouding your judgement too. 

It takes away the stress of trying to time the market (“buy low and sell high”), which is very difficult (nearly impossible) to achieve. Investors no longer need to fear entering the market at the wrong time and making impulsive and ill-informed decisions because of it. 

Instead, they are empowered to invest confidently, with a clear frame of mind.

As the saying goes, it’s not about timing the market, but time in the market!

You can do it too!

The good news is you’ll only need 2 things to practice dollar-cost averaging- discipline and patience.

At this point, you may be worried about having enough determination, or that the admin fees may add up from the multiple investment transactions.

Fret not! We’ve got two perfect solutions for you – AutoInvest and Earn+.

AutoInvest makes setting money aside so simple and flexible, you’ll be hard-pressed to find an excuse not to do it. 

No more navigating complicated processes to grow your wealth! AutoInvest lets you put aside any amount regularly and on the go ($1 (!), $2, $5) whenever you use any Grab services. This way, you’ll be investing even when you’re not thinking about it! 

This amount will then be invested into a smart, low-risk portfolio managed by best-in-class asset managers, to earn you 1.18% interest rate p.a*. When it comes to fees, it’s completely free to invest habitually because topping up your AutoInvest account with your GrabPay wallet is free!

On the other hand, with Earn+, your money is invested into a low-risk, diversified portfolio to earn you an estimated 2 to 2.5% return p.a*. The portfolio is made up of short-term bond funds which are low-risk investments, managed by our expert partners – Fullerton Fund Management and UOB Asset Management. 

Want a more in-depth comparison of the two? Check out this article where we break it down for you!


*Projected yield and returns are not guaranteed or protected. Please refer to our current projected yield and returns.

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Komsan Chiyadis

GrabFood delivery-partner, Thailand

Komsan Chiyadis

GrabFood delivery-partner, Thailand

COVID-19 has dealt an unprecedented blow to the tourism industry, affecting the livelihoods of millions of workers. One of them was Komsan, an assistant chef in a luxury hotel based in the Srinakarin area.

As the number of tourists at the hotel plunged, he decided to sign up as a GrabFood delivery-partner to earn an alternative income. Soon after, the hotel ceased operations.

Komsan has viewed this change through an optimistic lens, calling it the perfect opportunity for him to embark on a fresh journey after his previous job. Aside from GrabFood deliveries, he now also picks up GrabExpress jobs. It can get tiring, having to shuttle between different locations, but Komsan finds it exciting. And mostly, he’s glad to get his income back on track.