DOLLAR COST AVERAGING

I can’t stress enough how the concept of cost dollar averaging can help you to invest smarter. I found this article from Ric Edelmen’s email that is very motivating and informational. If you only read one article about investing in a year, here’s the one that you should read:



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How Dollar Cost Averaging Works


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Say you have $100 and you buy a stock that costs $10 per share. That means you buy 10 shares. Next month, you save another $100, which you place into the same fund, only now the shares are just $5. Thus, you buy 20 shares. What’s the average price of all your shares?


If you said $7.50, you’re wrong.


You invested $200 ($100 per month over two months) and you own 30 shares (you bought 10 shares, then 20). Divide $200 by 30 shares and you’ll find that the answer is $6.67.


Why did you think the answer was $7.50?


Because you used the arithmetic mean ($10 + $5 divided by 2 = $7.50). But I used the harmonic mean ($200 divided by 30). Thus, we’re both right — the average price is $7.50, but the average cost is $6.67. Since the harmonic mean always produces a lower number than the arithmetic mean, you have a built-in profit!


Dollar cost averaging succeeds because you buy fewer shares at higher prices and relatively more shares at lower prices. To make it work for you, simply invest a specific amount of money at a specific interval. Perhaps $100 per month, $25 per quarter or a $3,000 IRA each year. It does not matter as long as you are consistent. Be sure to invest at each interval, regardless of what the stock market is doing at the moment.


In fact, dollar cost averaging helps you overcome your fear that you’ll invest at the top of the market. If you had invested $1,000 in the S&P 500 on January 1 of every year from 1965 through 2002, you’d have earned an average annual return of 10.2%. But if you got really lucky and were able to make your investments on the one day each year when prices were at their lowest, you’d have averaged 10.9% instead. But, knowing your luck, it’s more likely that you’d have picked the worst day to invest each year. If so, your average annual return would have been 9.8%.


As you can see, it doesn’t much matter when you invest when you dollar cost average. It only matters that you do invest and that you stay invested. "Timing" doesn’t matter — "time in" does.*


~excerpt from the Truth About Money by Ric Edelman

MELABUR MELALUI EPF

PENGENALAN - DEFINISI SIMPANAN ASAS

SYARAT-SYARAT YANG DITETAPKAN

1.Mulai 1 Februari 2008 , ahli boleh melaburkan simpanan di bawah PPA tidak melebihi 20% daripada jumlah simpanan yang melebihi Simpanan Asas dalam Akaun 1.


2.Pelaburan ini boleh dibuat setiap 3 bulan sekali dan jumlah minimum pelaburan ialah RM1,000.00.


3.Jumlah Simpanan Asas dan contoh pengiraan adalah seperti di LAMPIRAN.


4.Syarat-syarat am prosedur di bawah Pengeluaran Pelaburan Ahli yang lain masih kekal dan tidak berubah.

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Money Don't Grow On Trees

This is my first posting on this new blog.
Will be discussing on the importance of investing and preserving ur money.
Will have more discussions in the day ahead..