Value Averaging

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.

Dollar Cost Average

Dollar Cost Average is the purchasing of a fixed dollar amount of a particular investment or fund on a regular basis, regardless of the fund price.

You have to buy an initial amount of around $1,000; varies in different countries and depending on the fund house you are investing in. After the initial investment, you can then decide to put a certain amount into the fund, minimum usually is around $100 per month or more depending on your budget.

You are allowed to do this monthly payment by way of bank transfer which keep the task of monthly investing very convenience.

Dollar Cost Average means that your money is going into a fund at a set date monthly or weekly and you are investing at both the high points and the low points. Therefore, the share price or NAV (net asset value) you invest at averages out. Theoretically, you are investing equally when stock or fund is up as when it is down.

Naturally, you hope the stock or fund will keep going up, but either way you continue to put in the same amount of money with the theory that despite the ups and downs, you are headed for a long-term positive gain.