Dollar Cost Averaging to Invest Successfully

Now we are having financial crisis which we often think that

• When is the best time to enter the market?
• Whether u can have a good entry and earned a favorable return for your investment?

How this method works?
Instead of invest a lump sum of money in a particular investment, the investor can allocating certain amount of funds for a certain period such as every month to invest on a particular investment.

Advantage
It spread the investment over a number of period which providing insulation against the risk such as the changes in market price.

Disadvantage
Requires investor to give up some expected return of benefit which when you can enter the market in a lower price.

Setting Up Your Own Dollar Cost Averaging Plan
1. Select the time horizon on how long you wanted to keep up with the dollar cost averaging
2. Decide exactly how much money you can invest each month
3. Select an investment
4. Decide the regular intervals such as weekly or monthly

An Example of a Dollar Cost Averaging Plan
Company “A” Shares (Invest date, Amount Invested, Shares price, Shares purchased)
Jan 2009, RM 2000, RM 10.00, 200 shares
Feb 2009, RM 2000, RM 8.00, 250 shares
Mar 2009, RM 2000, RM 12.50, 160 shares
Total RM 6000, RM10.17(Average), 610 shares owned

When the economy recovers in April, share price recover to RM 13 per share and you have earned RM 2.83 per shares.

Dollar Cost Averaging does help reduce market risk and you can take the opportunities to invest and set yourself up with a dollar cost averaging plan and get going.