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:
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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
