Dollar-cost averaging (DCA) is an investing strategy commonly prescribed for the ‘average’ investor on the street. It involves putting a consistent amount of money into an ASX share or portfolio of shares at a consistent interval over time (e.g. $100 a week), with no regard to the underlying price. In this way, you can get an averaged price without having to worry about timing the right entry point, which can be an emotionally fraught exercise.
Of course, this only works if you have a quality company that rises in value over time. Anyone who tried dollar-cost averaging into say AMP Limited (ASX: AMP) over the last decade would have been throwing money away.
So with that in mind, here are 3 ASX shares that I think are perfect for a DCA strategy.
Vanguard Australian Shares Index ETF (ASX: VAS)
This exchange-traded fund (ETF) is perfect for a DCA strategy. That’s because it holds not 1, but 300 of the largest companies on the ASX. It’s impossible to figure out whether an index fund like VAS is truly overvalued or undervalued at any one point, because you would have to do pricing analysis on all 300 companies.
Thus, a far easier way of successfully investing in a basket of companies like this would be to employ DCA. Losing companies are eventually weeded out and rising stars are added to over time. Index funds like VAS have historically always risen and made new highs (despite some volatility in between), and therefore I think this type of investment will serve you well under a DCA strategy.
Washington H. Soul Pattinson & Co Ltd (ASX: SOL)
‘Soul Patts’ is a company that acts as an investor in its own right. It does so by buying other ASX shares and building its own investment portfolio outside its old core business of operating pharmacies. Today, Soul Patts has large stakes in a diverse range of Aussie companies, including TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC) and BKI Investment Co Ltd (ASX: BKI).
Thus, I think this company is a great alternative to an ASX index fund like VAS – which some investors might not like due to the heavy exposure to ASX banks and miners. It has a proud history of growth, including an unbeatable 20-year streak of increasing its dividends. As such, I think it’s a great company to employ a DCA strategy into.
For some more ASX shares that you could use a dollar-cost averaging stragegy with, make sure you check out the report below!
NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….
Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.
One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…
Another is a diversified conglomerate trading over 40% off it’s high, all while offering a fully franked dividend yield over 3%…
Plus 3 more cheap bets that could position you to profit over the next 12 months!
See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.
More reading
- 2 quality ASX shares to buy for long-term growth
- Replace your term deposit with these dividend shares
- My ASX share for the week
- How to retire early using ASX shares
- Where to invest $1,000 in ASX ETFs today
Motley Fool contributor Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post 2 ASX shares perfect for dollar-cost averaging appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/3ehjNW6
Leave a Reply