Dollar Cost Averaging a Better Strategy ?

What is Dollar Cost Averaging ?

Strategy in which you invest in a fixed amount of money at a regular basis/ intervals regardless of the market price of an investment .

The Question is , Not Why but HOW can this strategy BENEFITS you and me as a whole?

Lets take an example here, Let's assume we have two different investors here. One with a lump sum investment and one with a monthly investment of $100 per month for 6 months. 

                                         Investor A                         

                        Price $                          No. of
                                                            Units /
                                                            Shares

Month 1           5              $600               120                                
Month 2           5                                      
Month 3           2                                      
Month 4           4                                         

Month 5           3                                    
Month 6           5                                        

What we can see here is that , investor A invested $600 with the no of units / shares of 120 at the price or $5

                                      Investor B                         

                        Price $                         No. of
                                                           Units
                                                           / Shares

Month 1           5                  $100          20                              
Month 2           5                  $100          20                                    
Month 3           2                  $100          50                     

Month 4           4                  $100          25                   

Month 5           3                  $100          33.33                    

Month 6           5                  $100          20                       

               3.56¹ $600   168.33²

¹[( $5 + $5+$2+$4+$3+$2) divided by 6 months.]

²[ (20+20+50+25+33.33+20) divided by 6 months ]

If you can see , there's two differences in using the Dollar Cost Averaging :

1. The price are lower / cost are lower  , instead of $5 is now $3.56 

2. The no of units / shares are higher , instead of 120 is 168.33.

There by using Dollar Cost Averaging its helps us as an investor to create a better opportunity increasing profits and minimizing cost in a longer run. 

Besides  it also helps us to take advantage of the market as we can never time the market. By investing in this strategy we are always in the market whether the market is up or down and hence , we are taking the opportunity each time the market reacts. We all know the beauty of buy low but the fact is how low is low ?

Dollar Cost Averaging also promotes force savings where it creates a good habit for us to set aside our income for investment to add value in our future so that we can achieve our financial goals at a given time frame.

By doing Dollar Cost Averaging , we are less burden in our finances as we could put a comfortable level on our monthly savings / investments instead of a huge amount of lump sum to be saved / invested at a given time. This means , we could save / invest to achieve our financial goals at the same time we do not need to compensate on our lifestyle. That/s a pretty good news for you and me. 

Last but not least,  however this strategy is best to be used for a longer term of investment objectives.

If you have any questions on Dollar Cost Averaging or any other questions on financial goals planning / investment options do not hesitate to leave a comment 

  charissim.ristyle@gmail.com

Real Estate vs Stocks ?

Being in this industry for a couple of years , many people came to me and asked me , " why aren't you investing in property ? , " why don't you get yourself a license to be a property agent ? , " why not getting yourself a house ?" ,  " house is an asset"

Well house is an asset ? To me that's depends on how you see it or view it. However I will discuss this perhaps next round.  Comment if you want to hear my opinion.

Of course living in the Asian country we all grow up in listening to , we should get a property , it's an investment that never goes wrong and never fall.  It will definately gets a return over time. Well to be honest, yes all invest,net will definately gives you a return over time.

The thing is I don't disagree 100% what people say here. Yes property does gives a return and yes it could be very good returns and yes it could be never fall. However , I believe everything draws into a word call preference.

Today I'm gonna discuss about the pros and cons in both classes of assets.

Property

• It does gives us a sense of ownership especially when it is tangible. We are able to see it feel it touch it and even show it. 
• We are able to control it as we can always to a checking on tenants , inspect on our property , value on our property , run it. Basically we have control over it. 
• Leveraging. We all know the power of leveraging is good. We can actually leverage on the bank and that's good because we could purchased it at a lower price and slowly pay back the bank. 
• It gives a sense of security especially when the market is down because we could use it as an instrument for hedging. 
• It gives us monthly income if we are renting it out which hence , we are having an additional of side income while doing nothing. 
• Lesser volatility

However ....

• It is a cost to use if there are vacant in the property 
• We are bound by bank debts or loans
• There are bound to be a cost of maintenance 
• Handle the necessary maintenance problems 
• Might not be able to liquidate quickly 
• Need a bigger capital to kick start 
• Commitment of time to manage and maintain the property 

Stocks 

• The ability to reinvest and the ability to gain from dividends in a longer run 
• Managed by professional , hence save the hassle of monitoring 
• In a longer run it is proven to be one of the greatest wealth creator in the world
• Easier to diversified our portfolio because the cost are usually lower or to startup is takes a minimum of RM1000.  Therefore , it is more affortable 
• It's allows us to take into the account of dollar cost averaging by investing it on a more consistent basis such as monthly , quarterly , semi annually with as low as RM100 per month in order for us to take as rage of the market. 
• It's also creates a better liquidity as compare to property

However ....

• Stocks has a higher volatility as compare to property and its usually doesn't see any profit in their short term
• In stocks we often see a paper lost especially each time after a dividend is paid up encases the share price will reduce. However we are actually gaining in real terms 
• We can't be able to feel it nor touch it as it is a paper investment

The thing is both asset classes has its own benefits and disadvantages , to me it is just a preference I personally prefer to hold paper investment because it is more in the market and it gives me the return which could be as similar as property investment in the longer run. 

Hope this helps you or if you have anything to add one do comment below. It is always good to share so,e ideas and insights because in investment there's I sing any right or wrong. We all have different experience in different classes of assets.