Dollar Cost Averaging

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succceed in forecasting what's going to happen in the stock market" - Benjamin Graham, author of "The Intelligent Investor"


Dollar cost averaging is an investment technique intended to reduce exposure to risk associated with making a single large purchase by investing a fixed amount on a particular investment, such as mutual fund, at regular basis.

Here's how it works. You don't have to invest lump sum of $18,000 and bear the risk of entering when the market is high. In this example, the average cost per unit is 0.2119, the value of the fund is $18,125.

Month	Investment Amount	Price / unit	Units Purchased
Jan	$1,500	0.2544	5,896
Feb	$1,500	0.2465	6,085
Mar	$1,500	0.2356	6,367
Apr	$1,500	0.2458	6,103
May	$1,500	0.2245	6,682
Jun	$1,500	0.2156	6,957
Jul	$1,500	0.2056	7,296
Aug	$1,500	0.1845	8,130
Sep	$1,500	0.1756	8,542
Oct	$1,500	0.1834	8,179
Nov	$1,500	0.1956	7,669
Dec	$1,500	0.2134	7,029
Total	$18,000		84,934

Dollar cost averaging is a long term investment strategy. You may set automatic deductions from your paycheck every month to invest.

"Those who put an investment programme in place will have a lot more money when they come to retire than those who never get around to it." - Noel Whittaker, Australian financial author.