Dollar Cost Averaging
You may have heard of this concept if you invest via a savings product where you make a regular payment into your product, such as our Regular Savings Plan.
Essentially, dollar cost averaging represents the smoothing nature of investing small amounts on a regular basis in fluctuating markets.
If we use the example of an open-ended investment fund, each regular amount invested buys shares in the fund. If the price is high, then fewer shares will be purchased. Likewise, if the price is low, then more shares will be purchased. Over time, this could result in a potentially higher average value per share and so improve potential returns.
The benefit of dollar cost averaging is that it removes worries about market timing, because investing regularly over time may help average out stock market volatility.
Dollar cost averaging does not guarantee a gain or protect against losses in a falling market, however it may reduce exposure to market risk.
Past performance is not a guide to future performance and the value of investments can fall as well as rise.