Finimize Live: The Easy-Does-It Wealth-Building Strategy

Finimize Live: The Easy-Does-It Wealth-Building Strategy

almost 3 years ago β€’ 2 mins

Hi, it’s Community Host Sushant Ghargi here πŸ‘‹ On February 26th, 2021, I was joined by Chuin Ting Weber, CEO and CIO of MoneyOwl, to discuss if dollar-cost averaging (DCA) is really the best way to invest.

Most financial planners recommend DCA – where investors drop money into the market at regular intervals – as a time-tested strategy to even out market cycles. However, a pre-event poll showed that only 20% of attendees currently use it. Chuin Ting outlined the challenges and suggested some ways to overcome them.

Key Challenges:

The most common form of DCA involves investing equal amounts at regular intervals of time. The main challenges in putting this into practice are high transaction costs and time commitment. Chuin Ting shared some tips on addressing these challenges:

  • High Transaction Costs: If you don't have access to a low-commission broker, investors can consider DCA into unit trusts/mutual funds.
  • High Time Commitment: Investors can automate their DCA investments to minimise the time required to implement DCA.

Key Takeaways:

  • In comparison to lump-sum investing, DCA performs better in declining markets and recovering markets whereas lump sum investing performs better in rising markets.
  • Instead of having to guess what market cycle we are in, investors can follow DCA through all market cycles by investing in wider markets and staying invested for more than 10 years.
  • Investors can lump-sum invest when they have surplus cash and follow DCA from their regular paychecks to reap the benefits of both lump sum investing and DCA in building their portfolio.

DCA instills a sense of discipline in building a portfolio by providing a mechanism to overcome the temptations of timing the markets. A post-event poll found more than 90% of the participants looking to either implement DCA or a combination of DCA and lump-sum investing as a strategy to build their long-term portfolio.

Follow Sushant on Linkedin or find his next event featured in the Upcoming Events section of the Finimize app.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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