An introduction to dollar-cost averaging
We
are very excited about launching Raiz Down Under, giving Australians the chance
to invest their change to build something much bigger. One of the most
important messages we want to spread is that when you invest with Raiz, you
have chosen a smart and secure way to invest. Let’s look at one of the
techniques Raiz utilises to manage and grow your savings effectively-dollar-cost
averaging.
The
market will go up, the market will go down, being able to pick the low point
and see your portfolio grow in value is the dream, but is unlikely when acting
on intuition alone. Dollar-cost averaging involves regular investment over
time, regardless of movements in the market. This aims to reduce the need for
intuition in picking highs and lows in the market.
For
example, say you have $1,000 to invest. Instead of investing it all at once,
you could invest $100 each month into the market for 10 months, despite the
changes in the market value. If for example the stock of choice was priced at
$10 the first month, you would purchase 10 units. If during the second month
the stock was priced at $5, you would purchase 20 units, and so on. In the end,
you would have purchased more shares when prices were lower and fewer shares
when prices were higher, having invested more prudently than simply investing
the money all at once in a lump sum.
This
strategy has the potential to give you a low cost per share relative to the
overall average price per share – as you buy more units when the price is low,
and less when the price is high. This disciplined strategy is important,
ensuring you are not too exposed to falls in the market when you buy at the
top; and rewarding you when the market recovers, for buying when the market was
falling.
Dollar-cost
averaging is most effective in a long term saving strategy. As the market moves
up and down, dollar-cost averaging over time reduces your risks of trying to
pick the best times to invest from these swings, trending your portfolio
towards profitability.
You
can utilise Raiz to implement dollar-cost averaging at your own pace by
selecting another key feature, recurring deposits. Raiz will manage your
investment, all while saving you time, energy and uncertainty. For more information on Raiz fees, click here.
For
more information and to register for our beta testing due in November 2015,
make sure you visit www.Raizinvest.com.au and sign up!
Don’t have the Raiz App?
Download it for free in the App store or the Webapp below:
Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
