Sunday, April 19, 2009

Systematic & Disciplined Investing that pays

It is possible to improve investment portfolio by timing the market, but can it always be done correctly? Any unsuccessful attempts to time the market will seriously hurt the returns on investment.

The solution is to invest a fixed sum of money on a regular basis. Such discipline investment approach is Dollar Cost Averaging.

DCA is setting aside a percentage, say 15% percent, of your monthly income in a unit trust. Regardless of market sentiment, this strategy enable a specific dollar to be invested on a consistent manner.  During bad times, more unit units are acquired and in good times, less units. In this way, the average price per unit is being driven downwards.

DCA does not guarantee a profit, but it can help to smooth out the market's ups ad downs (volatility) and reduce the risk of loss. It foster discipline in investing regularly, and take full advantage when the market recovers.

Above all, DCA helps to remove the emotional factor from your investment programme, allowing you to focus on your long term investment goal and avoid the pitfalls of buying high and selling low in the market.