Step-Up DCA: The Secret to Retiring Early
Also known as a Top-Up DCA, this simple strategy allows you to start small and automatically increase your investment as your salary grows.
1. What is a Step-Up DCA?
When you set up a Step-Up DCA, you commit to increasing your investment amount by a certain percentage every year (e.g., 10%).
Because your salary usually increases by 8-12% every year, it makes sense that your investments should increase by the same proportion to combat inflation.
2. The Mathematics of a 10% Top-Up
The $1,000 Challenge
Let's see what happens if you invest $1,000 per month for 20 years (at 12% returns):
- Normal DCA: You end up with $1,000,000.
- 10% Step-Up DCA: You end up with $2,000,000.
By simply increasing your investment by 10% every year, you nearly doubled your final wealth!
3. Should You Use It?
Absolutely. You can calculate the exact effect of a Step-Up DCA using the calculator on our homepage. We highly recommend starting with a 10% annual top-up.