Dollar Cost Averaging Investment – The Best Strategy

Part 1

Considering the low interest offered by fixed-deposit as from this year 2009, it would take you 28.8 years to make your saving or investment double or becomes 100%; say RM10,000 becomes RM20,000 or RM50,000 becomes RM100,000. The number of years can be calculated simply via applying the Rule 72. No. of years = 72 / 2.5(%). The rate for 12 months’ FD is 2.5% for most banks in Malaysia.

Due to the long term needed to double one’s investment via FD, it would be very awkward or impossible for parents to accumulate enough money to sponsor their children’s higher education in less than ten years or even shorter period.

Besides putting money in FD, of course there are other ways of investment like stocks, foreign exchange, options trading, properties or even investing in gold; but due to the high risk, expertise and longer time needed to monitor these types of investment, I should think investment in Unit Trust would be more appropriate for most of the parents and individuals in Malaysia.

If investment in Unit Trust can produce a yearly return of  8% to 10%, then it takes only 9 or 7.2 years to double the investment.

However, because of the recent world-wide economy crisis, quite a number of people are also afraid of the risk involved in any type of investment. As our team has been in this field of financial planning for more than ten years, we can humbly say that there would be no loss after investing for more than 3 years or longer, this is based on our clients’ real records. Of course, one must invest in a unit trust company with longer history and good prestige.

During this volatile market, investing unit trust or mutual fund via Dollar Cost Averaging (invest a fixed amount of money at regular intervals) would be the best strategy because no matter what type of market say rising market, falling market or fluctuating market, at the end of the day investors would get more shares or units. It will also reduce the average fund price so as to get more profit in the future.

In fact, investors would get more units in the fluctuating market; we'll explain this in more detail in "Part II".

( Chinese Version ) 

By Vincent Chai from www.ecatcity.com

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