Recession and falling Markets are a wonderful thing…at least for those lining up to start a regular savings plan. This year is the perfect time to start this Profitable Discipline.
Low prices mean lots and lots of cheap shares, and this brings into play the magic of ‘DOLLAR-COST AVERAGING’.
Do not delay…now is the time!
Perhaps one of the most effective methods of investing in stocks and shares, mutual funds or unit trusts is to set up a regular savings plan with a reputable offshore life assurance company. In so doing you not only start on the road to financial security you will also gain access to the powerful effects of “dollar cost averaging” …
Smoothing out market movements
Putting away a predetermined amount of money on a regular basis is a proven way to pursue the accumulation of wealth over time. But the strategy, called dollar-cost averaging, produces other benefits as well.
Once you have begun, it serves as a strong reminder to invest at the appointed time.
Eliminates the need to decide when to invest
When it’s time to invest, you do so, regardless of what is going on in the market.
Avoids the temptation to time the market
Some investors cannot resist the urge to try to invest at a market low and take their profits at a market high; they usually fail because the task is virtually impossible, even for the experts.
How Dollar-Cost Averaging Works
The object is to invest a set amount of money at regular intervals so the average cost of shares tends to even out the market’s peaks and troughs. Your dollars purchase fewer shares when the market is up, but they buy more when it’s down.
While you may not achieve the positive results of buying at the market’s low point and selling at its high point, neither will you suffer the consequences of doing the opposite, on the average, in a generally rising market, you have the opportunity to accumulate wealth over time in a systematic, organized way.
Four things to remember about dollar-cost averaging
In the long run, it doesn’t matter when you start, just that you start. Over a long enough period, it makes little difference whether the market was up or down when you began.
Making monthly additions to your account allows you three times as many opportunities to benefit from favorable market swings as investing on a quarterly basis. The more frequently you invest and the longer you keep investing, the smoother the average-share-cost line becomes.
A market decline can mean bargain prices. Unless you are selling shares, a fund’s price quote in the daily paper is not relevant for anyone who is not planning to sell, so don’t panic if it is down. In fact, a downturn provides the opportunity to buy more shares at attractive prices shares that have the potential to grow in value when the market finally turns upward,
Be prepared to weather a sustained market decline. Keep in mind that in order for dollar-cost averaging work, you must be prepared to commit financial resources and have the resolve to make the contributions on each appointed date. Regular investing does not ensure a profit and does not protect against loss in declining markets. Investors should consider their ability to invest continuously during periods of fluctuating price levels.
Savings Plans – there is profit in discipline!
Regular savings plans, preferably monthly funded, thrive on volatility and the rollercoaster times of recession and falling markets. At the end of the road, in a year or three everything starts flying high again, and all those months of purchasing shares at low prices means a massive accumulation of cheap shares.
When the investment up cycle returns, the profit sun starts shining again, and the army of shares all march onwards and upwards, and profits flood in…patience and perseverance are the name of the game in the Great Investment Advantage.
Now is definitely the time.