Adjusting a DCA Strategy Amid a Market Correction

The Jakarta Composite Index (JCI), aka Indeks Harga Saham Gabungan (IHSG), has faced a sharp correction throughout the first quarter of 2026. As of March 31, the IHSG had dropped more than 20% from its all-time high. This pressure has mainly been driven by a combination of external and internal factors: the escalation of geopolitical conflict in the Middle East, which has triggered a global risk-off sentiment; protectionist policies and uncertainty over U.S. interest rates; and ongoing capital market reforms in Indonesia by regulators. The IHSG’s performance reflects broader global weakness, which has also led to foreign capital outflows.

Even so, retail investors with a medium- to long-term horizon (≥3–5 years) are encouraged to stay calm and continue applying disciplined investment strategies such as Dollar Cost Averaging (DCA). In fact, market corrections are a normal phase in the stock market cycle and serve to “normalize” stock valuations that may have become too expensive.

So, how should investors adjust their DCA strategy while the IHSG remains volatile in the coming period? When should they continue investing regularly, add more capital, or temporarily pause?

Current Market Conditions

Global concerns have pushed investors toward safer assets such as gold or the U.S. dollar, reducing exposure to emerging market equities, including Indonesia. The Indonesian market is closely tied to global capital flows—when risk rises, foreign capital tends to be withdrawn. The ongoing capital market reform process has also triggered stock selling by local investors. Additional pressure has come from a downgrade in the credit outlook by rating agencies as well as higher interest rates being held for longer.

As a result, IHSG volatility remains high, with the potential for a short-term rebound depending on geopolitical stability and support from monetary policy. Therefore, investors should focus on long-term investing and strengthen risk management through diversification and by selecting stocks with strong fundamentals.

DCA Options: Risk versus Reward

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Dollar Cost Averaging (DCA) is a gradual investment strategy that allocates a fixed amount of money at regular intervals without paying too much attention to price fluctuations. This technique reduces market timing risk because when prices are low, investors buy more units, and when prices are high, they buy fewer. The average purchase cost goes down (averaging down), and the impact of short-term market fluctuations can be mitigated.

DCA is essentially a passive strategy, but investors often face challenges when the market drops sharply. By considering allocation size, asset selection, the pace of capital deployment, and portfolio reviews (including rebalancing needs), there are three common options investors can take.

1. Consistent: Maintain a regular investing discipline to avoid timing mistakes. Investors continue buying even when prices fall, allowing them to accumulate more units at lower prices. This option is simple and relatively safe psychologically, although the profit potential is not as large as when the buying portion is increased.

   
   

2. Aggressive: Use the momentum of the price correction by adding more capital, which can potentially lead to higher returns after a rebound because the average purchase price is much lower. However, this approach requires a larger cash reserve and increases volatility risk. If the decline continues, adjusting too quickly can increase short-term losses.

   
   

3. Temporary Pause: Delay part or all of the investment during a market downturn to reduce short-term exposure while preserving liquidity, usually due to market concerns or cash needs. The investor loses the opportunity to accumulate stocks at lower prices, and when a rebound comes, the result will be far below both the aggressive and consistent scenarios because fewer units were bought.

Investor Decision Path

If the long-term goal is ≥5 years and the risk profile is conservative to moderate, continuing regular DCA is recommended. The result is a more stable portfolio with more controlled risk.

For investors with a more aggressive risk profile, adding more capital to DCA when prices are low can provide an opportunity to lock in higher returns.

However, if the market environment feels uncomfortable psychologically, investors may choose to pause DCA and temporarily hold cash savings, even though they may miss the rebound.

Pro tip: Know the amount that feels comfortable to allocate based on income, expenses, and each person’s financial obligations. Choosing the right instrument also matters—it requires individual research and a deeper understanding of market information.

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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).

Which DCA strategy are you taking while the IHSG is going through a correction?

• Consistent
• Aggresive
• Temporary Pause