We’ve all heard of Dollar Cost Averaging. Here is the meth behind it.

Edit: Title should read math. Not meth. There is no meth behind this. Please don’t DCA on meth. Meth is bad.

Since a lot of people still get this wrong, here’s how it works (don’t worry – the math behind it is as straightforward as it gets).

Say you buy 100$ worth of ALGO at $1 and then another 100$ worth at $0.5

Intuitively, you’d think your average cost is $0.75 ~ ((1 + 0.5)/2) ~ right?

If you think so, worry not. You’re not alone, and this is a very common misconception.

In reality, here’s how it works:

You now have a total of 100 + 200 ALGO (so, 300) Since you invested $200 Your average is 200/300 = $0.67 and not $0.75.

It may be very basic math for most of you. But for many, this is still not fully grasped!