Does Dollar Cost Averaging Work?

[ngkk69]

I have investing unit trust through regular premium. A lot of people say that dollar averaging cost will generate a higher return in the long run? Does it really work? Will it work well with the unit trust? My intention is to save and invest regularly for 20 years. During the recession time, should I switch the fund to bond to protect my capital? If I do that, will it defeat the purpose of using dollar cost averaging strategy? If I do not switch the fund to bond, it will erode all my profit. Could someone advise me? Thank you.

[archonmage]

Hi, ngkk69.
I will do my best to give you my personal view based on your queries.

I have investing unit trust through regular premium

Fyi, typically unit trust has a higher expense ratio and management fees. In investment sense, the fees will erode away your returns. A better approach is to go for ETF which has lower fees, thereby, increase your rate of returns. Alternatively, you can also consider phillips Share Builders Plan, which help you to buy shares on a regularly basis. You can read more about it at http://www.poems.com.sg/financialservic ... ?value=sbp

A lot of people say that dollar averaging cost will generate a higher return in the long run? Does it really work? Will it work well with the unit trust?

Dollar Cost Averaging (DCA) can work if you have a long investment timeframe and the market has fluctuations, ie. you buy lesser units when the price is high and more units when it is low.

It is presume that the market will generally goes higher and higher, hence, DCA will work as you will certainly has a lower price. As I have mentioned earlier, unit trust has its flaws. Think about it.

My intention is to save and invest regularly for 20 years. During the recession time, should I switch the fund to bond to protect my capital? If I do that, will it defeat the purpose of using dollar cost averaging strategy?

By the time that you are aware it is a recession, there is a chance that it is too late to switch to a bond fund as the equity fund might already hit with substantial losses based on your average entry price. Since DCA is to help you get more units when the price is low, it would defeat the purpose of DCA by switching to a bond fund.

If I do not switch the fund to bond, it will erode all my profit.

Perhaps you are able to lock in some profits by the time you sell away when recession strikes. But as mentioned earlier, DCA supposed to help in the long run. Unless you can time the market very well for entry and exit, if not, stay with the DCA approach.

Could someone advise me?

Have you give a thought on what is your expected rate of returns for a span of 20 years? And what is the objective of your investment?

I am pretty sure that there are plentiful of options available. Explore on it and decide for yourself.

Regards,
a.m.

[dvortex]

I have investing unit trust through regular premium. A lot of people say that dollar averaging cost will generate a higher return in the long run? Does it really work? Will it work well with the unit trust? My intention is to save and invest regularly for 20 years. During the recession time, should I switch the fund to bond to protect my capital? If I do that, will it defeat the purpose of using dollar cost averaging strategy? If I do not switch the fund to bond, it will erode all my profit. Could someone advise me? Thank you.

Hi ngkk69,

Dollar Cost Averaging works based on a very important assumption -that is, the trend is going upwards.

So if trend is upwards, by picking stocks at various levels are you accumulating a bigger bag, but what if it isnt? what if its prices are trading horizontal, if not downwards.

Look at those technology funds back in 1999/2000s where some "financial advisers" from different firms were telling people to cash in and the nice 'dollar cost averaging" chart they drew to convince people this strategy works. If you had been dollar cost averaging these technology funds to date, are you getting richer by having more of these fund's share or depreciating your principle outlay where you could earn more elsewhere by attending Dennis classes.

Dollar cost averaging is a strategy. Behind every strategy is a fundamental. Behind every fundamental is a basis of understanding.

Fundamentals are very important. In this case, the fundamental is assuming trend is upwards.

And the fundamental behind Dennis strategy? What is Upside Vs Downside and What if i am wrong?

Just my 2 cents...

[findleowong]

Hi Ngkk69,

For unit trust, dollar averaging cost will works & it’s proven in the market. My mentor do knows some wealthy investor s only uses unit trust in their investment.

However, they operate the funds are totally different from the rest. They will determine what are the funds to buy for their portfolio, how much to assign for each fund, what price to sell, what economic indicators to watch out for, using technical analysis on the funds, etc.

Fund investing is for the know nothing investor but the basic needs for understand how to read the funds figure & report are still require.

However, most people do not understand the funds they are buying, numbers reported from the fund. They will just buy the fund and cast it aside without bothering it.

Once they start to lose money, they will complain that the fund is lousy but at the very first place, they might have bought the wrong fund or even if they bought a good fund, they din know how to manage it.

Bond might not be the best option hence it also depend on the type of bonds the person is buying. Importantly, understand the product before buying thus dun be lure away by those ads or poster put up in the newspaper or others. Those funds might not be suitable for everyone.

cheers

[Dennis Ng]

I have investing unit trust through regular premium. A lot of people say that dollar averaging cost will generate a higher return in the long run? Does it really work? Will it work well with the unit trust? My intention is to save and invest regularly for 20 years. During the recession time, should I switch the fund to bond to protect my capital? If I do that, will it defeat the purpose of using dollar cost averaging strategy? If I do not switch the fund to bond, it will erode all my profit. Could someone advise me? Thank you.

Hi ngkk69,

Dollar Cost Averaging works based on a very important assumption -that is, the trend is going upwards.

I'm so happy to see the deluge of comments/knowledge shared so far on this topic, it shows this forum is really a special place where there is alot of selfless sharing of knowledge/experience.

just want to comment that Dollar Cost Averaging can work if trend is either sideways or upwards.

It may be useful for people who have regular savings to invest on a regular basis. However, for an investor who has S$100,000 or S$500,000 or more to invest, then how long will it take for this person to invest on a regular basis before the sum is fully invested, and how much to invest?

Furthermore, it also does NOT work if prices is on a downtrend.

[woonty]

I agree, it is good for volatile, side-way but not so good for down market (it must turn up)

How long does one take to invert on a regular basis before the sum is fully invested depends on how much he invest/mth

I have read in the paper someone who DCA $80K every month!!!

But not sure how his portfolio is performing & where he invest in

So $500K will be exhaused in 6.25 mths for him

[ngkk69]

Thank you for selfless sharing. Technically, it should be worked for most of the times if you choose a right fund. I have invested in NTUC unit trust for the last 6 years using DCA strategy, however, until today I do not know what is my average cost for the units and the total amount which I have invested. I think it may require many years before it can reach the break even pt. I have noticed that the price of the unit trust which I have bought have moved positively upward trend for the last 10 years, it may be good for people like me who do not know how to invest and what to invest in stock market to buy some unit trust and let the professional to manage your money. Of course, the concern is the management fee of the fund, it will erode some of your profit from the investment. One of the advantages of the regular saving to invest can restrict your own spending and compel you put some money aside for future retirement. For people who are lack of self- discipline to control their spending, it can be another option for them.

Before attending the wealth seminar conducted by Dennis Ng, I am really a bad investor. I have lost about 80K in the stock market for the last 10 years. I paid a 'big sum of school fee’ simply because I do not know how to invest. Like most of the investors, I buy share based on the tips provided by friends and financial advisers. I sell share on rumour and cut lost by averaging cost. This type of investment strategy is not going to work well as you are just investing blindly and depend on luck. It is really a stupid act. I want to thank Singapore government whom had opened a door for me to invest. I was inspired and encouraged to invest by the free allocation of the Singtel share. And I lost 80K because of ignorant. People get rich from stock market because thay have knowledge about investment. In the past, I use to believe that as long as you accumulate some shares, the ultimate value of the stock will grow. However, the reality of the life does not go as your wish.

Thank, Dennis Ng. You have provided me some knowledge about investment. I have determination to recover my lost and make some wealth from the stock market for next 20 years. Hopefully, my dream of becoming a millionaire will not take me too long before it can come true.

[Dennis Ng]

Thank you for selfless sharing. Technically, it should be worked for most of the times if you choose a right fund. I have invested in NTUC unit trust for the last 6 years using DCA strategy, however, until today I do not know what is my average cost for the units and the total amount which I have invested. I think it may require many years before it can reach the break even pt. I have noticed that the price of the unit trust which I have bought have moved positively upward trend for the last 10 years, it may be good for people like me who do not know how to invest and what to invest in stock market to buy some unit trust and let the professional to manage your money. Of course, the concern is the management fee of the fund, it will erode some of your profit from the investment. One of the advantages of the regular saving to invest can restrict your own spending and compel you put some money aside for future retirement. For people who are lack of self- discipline to control their spending, it can be another option for them.

Before attending the wealth seminar conducted by Dennis Ng, I am really a bad investor. I have lost about 80K in the stock market for the last 10 years. I paid a 'big sum of school fee’ simply because I do not know how to invest. Like most of the investors, I buy share based on the tips provided by friends and financial advisers. I sell share on rumour and cut lost by averaging cost. This type of investment strategy is not going to work well as you are just investing blindly and depend on luck. It is really a stupid act. I want to thank Singapore government whom had opened a door for me to invest. I was inspired and encouraged to invest by the free allocation of the Singtel share. And I lost 80K because of ignorant. People get rich from stock market because thay have knowledge about investment. In the past, I use to believe that as long as you accumulate some shares, the ultimate value of the stock will grow. However, the reality of the life does not go as your wish.

Thank, Dennis Ng. You have provided me some knowledge about investment. I have determination to recover my loss and make some wealth from the stock market for next 20 years. Hopefully, my dream of becoming a millionaire will not take me too long before it can come true.

Hi ngkk69,
there is a time and place for everything.

Learning to invest is a continuous process and this forum and many seminar graduates are willing to share with you our knowledge/experience.

You will be a Millionaire, you must believe 100% for that to happen though.