Dollar Cost Averaging Lowers Your Break-even Point – Investors’ Perspective

This is the continuation of the first article on Dollar Cost Averaging. That article is located here.

Now, we shall look at dollar cost averaging in action. Consider the scenario below:

Let’s say you invest in a unit trust fund, starting with $1,000, and you add up $1,000 to your investment every month. Let’s consider the scenario below:
———————————–
Month |||| Average NAV |||| No. of Units Added
1 ——– $1.01 ——— 990.1 units
2 ——– $1.05 ——— 952.38 units
3 ——– $1.03 ——— 970.87 units
4 ——– $1.09 ——— 917.43 units
5 ——– $1.20 ——— 833.33 units
6 ——– $1.00 ——— 1000 units
7 ——– $1.02 ——— 980.39 units
8 ——– $1.08 ——— 925.93 units
9 ——– $1.25 ——— 800 units
10 ——- $1.28 ——— 781.25 units
11 ——- $1.28 ——— 781.25 units
12 ——- $1.35 ——— 740.74 units

Total Investment ($) = $12,000
Total units Accummulated = 10,716.24 units
Average Cost of Units Accumulated = $1.11980
Average NAV for the whole period = $1.13667

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As you can see above, the average Net Asset Value (NAV) of the unit trust fund over 12 months was much higher than the average cost of units accumulated if you had implemented dollar cost averaging.

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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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Other related posts:

Risk Tolerance Level
Risk Tolerance Level: Part 2
Back to Basics: Recovering from Negative Returns
Types of Mutual Funds (Unit Trusts)
Understanding Unit Trust
Fund’s Strong Performance

About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

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