Similar to “Dollar Cost Averaging”, “Value Averaging” is also investing on a regular basis; weekly or monthly. The only difference is you do not invest the same amount monthly. “Value Averaging” means you are value investing. You invest more money when the market is down; the fund price is down, and you invest less money when the price goes up.
Of course, all investors hope the fund you have invested in will continue to rise, but there will almost always be highs and lows (peaks and valleys). You have just to hang on for long term. Meanwhile, you are taking advantage of the “lows”, using these pockets of dip as a great opportunity to pick up more shares according to your affordability level.
This different from “timing the market” as you are not speculating on how the market is going to move. You are just watching the ongoing pattern whereby you will make a buy when the fund price dips.
Psychologically, this can be a difficult investment plan to follow as when the fund price drops, it is not easy to continue putting in money, to say the least, putting in more money. It is easier to go the way of “Dollar Cost Average” style of investing. However, with highly paid smart fund managers managing your fund, and over the long term, hopefully the “lows” will be to your advantage to achieve your ultimate overall goal.
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