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Opportunities for long-term asset growth? The cost averaging effect can help

24.04.2025

Finding the perfect time to invest is difficult. Sometimes prices are high, and sometimes the risk is too great. Instead of waiting too long and missing opportunities, the cost averaging effect can offer a simple solution: regular investments without constantly having to keep an eye on the market. This article shows exactly how it works, and why saving plans can help.

At a glance

  • With the cost averaging strategy, regular investments are made regardless of how the markets are developing.
  • Regular purchases smooth out the purchase prices and reduce the risk of investing at an unfavourable time.
  • Automated saving plans can protect against panic selling in times of crisis and prevent overexcited purchases during record highs.
  • Even small monthly amounts allow investors to build up assets in the long term, easily and without stress.

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Many savers want to invest their money, but the right time never seems to arrive. They often ask themselves, “Should I invest now, or wait a bit longer?”

This uncertainty is understandable as it can be hard to spot the right moment, especially when dealing with shares, ETFs and cryptocurrencies. However, hesitation can lead to missed opportunities and money sitting unused on your account.

The good news: with the cost averaging effect, money can be invested regularly without having to wait for the perfect moment. Price fluctuations are balanced out by making weekly or monthly investments of a fixed amount. This gives investors the opportunity for long-term asset growth. The effect can also be applied to volatile investments, such as Bitcoin.

Typical obstacles when investing – and how saving plans can help

The same doubts crop up again and again when investing, often leading to hesitation in taking the first step – in these cases, the cost averaging effect can be the perfect starting point.

“I don’t have enough money to invest”

Many people think they can only start investing if they already have a lot of assets. However, you can start investing with small amounts – for example with a saving plan (often from as little as 20 francs). Those investing regularly can benefit additionally from the cost averaging effect.

“Investing in shares and cryptocurrencies is too risky”

Yes, every capital investment carries risks such as price fluctuations. A saving plan can help reduce the risk of investing at an unfavourable time because investments are made at different points. Additionally, overall risk is reduced through wide diversification over a range of investments.

 

“Cryptocurrency prices are much too high – I’d rather wait until prices drop”

The problem here is that no one can reliably predict the best time to start investing. Those waiting for the perfect moment often miss opportunities. Investing regularly with a saving plan, however, means purchases are sometimes cheaper, sometimes more expensive – balancing out the level of purchase prices over time. 

“I don’t know whether the share price is currently too high or too low”

Nobody has a crystal ball. That said, regular investments spread the risk of investing at an unfavourable point over a wider time frame. That means investors avoid investing everything during a phase with high prices.

How does the cost averaging effect work?

The cost averaging effect is an investment strategy whereby investors make regular, fixed investments with no regard to whether the prices are currently high or low. By doing so, an average price emerges over time, reducing the risk of expensive mistakes.

The market phases principle:

  • In expensive market phases: because the price of the security or cryptocurrency is high, there are fewer shares for the amount invested.
  • In cheap market phases: the price of the security or cryptocurrency is lower, meaning more shares can be acquired.

Example of cost averaging effect with ETF/funds

With a funds or ETF saving plan, you invest automatically and regularly in financial markets, build up your fund assets systematically and benefit from the cost averaging effect.

The following graphic shows how the cost averaging effect works: when the rate is low, more fund units are bought; when the rate is higher, fewer fund units are bought. This means that an average price emerges over a longer period of time, and you can benefit from this in the long term – depending on developments on the financial markets.

This example explains the cost averaging effect: with a funds saving plan, fund units are purchased six times at different prices over a certain period of time. The higher the price, the fewer units are bought. The lower the price, the more units are bought. This compensates for price fluctuations over time.

Find out more about funds and ETF saving plans:

Why is the cost averaging effect worthwhile?

The cost averaging effect offers key benefits useful for both beginners and experienced investors:

  • Low risk: regular investments minimize the risk of investing at an unfavourable time.
  • Avoiding emotionally-charged mistakes: regular investments can help avoid panic purchases or sales.

How investors can best use the cost averaging effect

Depending on your personal situation and financial goals, there are many ways to successfully apply the cost averaging effect.

Opportunity for long-term asset growth

Ideal for those wanting to continuously build capital  – whether for larger purchases, purchasing a home or as a financial reserve. A solid wealth foundation can be laid with small amounts step by step, even while young.

Retirement planning

Many savers already rely on a cost averaging effect strategy by making regular payments into a retirement fund. Those investing in securities that generate regular returns also benefit from the compound interest effect – an opportunity to build or develop assets over the long term.

Saving for children

Whether a parent or godparent – anyone wanting to save money for children in the long term will find the cost averaging effect a good savings strategy. Regular payments into a saving plan can build up a financial cushion over time, especially when done over a long period. This can then be used for example to cover education costs or as a head start in adult life.

Investments in volatile assets

The cost averaging effect helps offset the risk of price fluctuations, especially for cryptocurrencies. Instead of speculating on the perfect time, the average cost effect can enable more balanced performance through regular purchases.

Disadvantages of the average cost effect

Though it has many advantages, investors should also be aware of the drawbacks of the cost averaging effect:

  • If prices only rise over a long period of time, a one-off investment may have yielded a higher return.
  • Total costs may be higher due to regular purchases. This should be noted in particular for platforms with fixed fees per purchase.
  • If an asset class decreases over years, the cost averaging effect won’t help avoid losses. It’s important to regularly review the investment strategy here.
  • The cost averaging effect only reaches maximum effectiveness for a medium to long-term investment horizon. Those looking for short-term gains should consider other strategies.

How is a cost averaging effect plan implemented?

A saving plan with the cost averaging effect can be implemented easily and in a structured way. Those who know their targets and take a step-by-step approach remain disciplined and stress-free in the long term.

  1. Determine your strategy: consider your investment horizon and how high your risk appetite is. An investment horizon of at least three to five years helps balance out price fluctuations.
  2. Determine your budget: set a budget that you can invest regularly. Assets can be built up over the long term even with small amounts.
  3. Choose your investment interval: decide whether you want to make investments weekly, monthly or at another interval.
  4. Find the right provider: compare financial service providers and take note of fees, the product range and ease of use.
  5. Set up a saving plan: set up an automatic saving plan to help you remain disciplined and make payments regularly.
  6. Review regularly: financial markets and personal goals change. Check if your strategy matches your targets at least once a year.

The cost averaging effect can offer a simple and stress-free opportunity to build assets in the long term. New investors in particular can benefit from the clear structure and lower risk. With regular investments and some patience, a secure financial future can be achieved step by step.

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