Sunday, May 17, 2009

STI: Er, what is dollar cost averaging?

May 17, 2009


Er, what is dollar cost averaging?


Where do you see this?


In investment articles.


What does it mean?


It refers to the disciplined saving strategy of putting aside a regular fixed sum into one's investment portfolio rather than one lump sum.


As a result, the price paid for the shares or unit trusts is averaged out. This means that more shares are bought when prices are low and fewer when prices are high.


Why is it important?


Often, people lack the discipline to save and invest consistently. Dollar cost averaging forces you to adopt a savings plan because you devote a fixed dollar amount to buying units every month or every quarter.


So you want to use the term. Just say...


'Despite the panic in the market, I'm continuing my dollar cost averaging strategy.'


Lorna Tan

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