Dollar-Cost Averaging is less risky than Lump-Sum Investing but with lower returns. A person who has a low tolerance for risk will opt for Dollar-Cost averaging.
What Is Dollar-Cost Averaging?
This refers to an investment strategy that involves dividing up the total amount to be invested across periodic purchases of a particular asset. This serves to reduce the impact of volatility.
What is Lump-Sum Investing?
As the name implies, this means that investor puts all or a huge bulk of their money into the market all at once.
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