Monthly Investment Plan »
Dollar Cost Averaging »
When Emotion Rules »
"Saving on a monthly basis provides the potential for capital growth and can be more effective than lump sum investments thanks to dollar cost averaging."
Peter Elston
Strategist – Asia
Aberdeen Asset Management
Dollar Cost Averaging »
When Emotion Rules »
"Saving on a monthly basis provides the potential for capital growth and can be more effective than lump sum investments thanks to dollar cost averaging."
Peter Elston
Strategist – Asia
Aberdeen Asset Management
Monthly Investment Plan
A monthly investment plan may just be the investment strategy investors need to benefit from a turbulent market.
With stock markets plummeting over the last year and a half and the fear of losing our job hanging over us, how is it possible to think about investing right now? Equity markets have more than halved. What is to stop them halving again? There is no doubt that we are experiencing one of the worst bear markets in history and it may well continue for a little longer. But there is one thing that you can be absolutely certain of: this bear market, like all others before it, will end.
And when it ends, you will not want all your savings to be in the bank. Like many investors before you, you could end up missing the first phase of the stock market recovery, a phase that is usually both swift and substantial. You may tell yourself that you're happy to wait. And that's a natural reaction given the severity of this bear market, which has sent us all running for cover. But missing out on this phase could significantly affect your long-term investment returns. The trick is to ignore market volatility and maintain some stock market exposure in a disciplined, relatively stress-free way.
Which is where the MIP (Monthly Investment Plan) comes in. By feeding money into the market at monthly intervals the MIP allows one to build positions gradually. If markets stay soft, well, the more your money will buy at any given time; and if they go up, then your purchasing power goes down but the overall value of your portfolio increases. The great thing about an MIP is the control it offers. You fix the amount you want to invest; you decide where you want to invest; and you can stop* and re-start the plan at any time. It's not a magic solution but it can help you avoid a lot of the investment mistakes that we are all prone to. Now read on…!
*The minimum initial investment and holding period differ with each distributor.
Dollar Cost Averaging
Broadly speaking, there are two types of investing: systematic and non-systematic. The first is a methodical approach and does not rely on one's emotions or gut feelings. You put a fixed amount into the fund every month, regardless of market behaviour and the price of units. If the price of the fund goes down, you buy more units; if it goes up, you buy fewer units.
A monthly investment plan may just be the investment strategy investors need to benefit from a turbulent market.
With stock markets plummeting over the last year and a half and the fear of losing our job hanging over us, how is it possible to think about investing right now? Equity markets have more than halved. What is to stop them halving again? There is no doubt that we are experiencing one of the worst bear markets in history and it may well continue for a little longer. But there is one thing that you can be absolutely certain of: this bear market, like all others before it, will end.
And when it ends, you will not want all your savings to be in the bank. Like many investors before you, you could end up missing the first phase of the stock market recovery, a phase that is usually both swift and substantial. You may tell yourself that you're happy to wait. And that's a natural reaction given the severity of this bear market, which has sent us all running for cover. But missing out on this phase could significantly affect your long-term investment returns. The trick is to ignore market volatility and maintain some stock market exposure in a disciplined, relatively stress-free way.
Which is where the MIP (Monthly Investment Plan) comes in. By feeding money into the market at monthly intervals the MIP allows one to build positions gradually. If markets stay soft, well, the more your money will buy at any given time; and if they go up, then your purchasing power goes down but the overall value of your portfolio increases. The great thing about an MIP is the control it offers. You fix the amount you want to invest; you decide where you want to invest; and you can stop* and re-start the plan at any time. It's not a magic solution but it can help you avoid a lot of the investment mistakes that we are all prone to. Now read on…!
*The minimum initial investment and holding period differ with each distributor.
Dollar Cost Averaging
Broadly speaking, there are two types of investing: systematic and non-systematic. The first is a methodical approach and does not rely on one's emotions or gut feelings. You put a fixed amount into the fund every month, regardless of market behaviour and the price of units. If the price of the fund goes down, you buy more units; if it goes up, you buy fewer units.
| Lump sum investment approach | Dollar cost averaging approach | ||||
| Value ($) | Unit cost ($) | No. of units | Monthly Value ($) | Unit cost ($) | No. of units |
| 1,000 | 1.00 | 1,000 | 250 | 1.00 | 250 |
| 250 | 0.5 | 500 | |||
| 250 | 1.00 | 250 | |||
| 250 | 2.00 | 125 | |||
| Total sum 1,000 |
Unit cost 1.00 |
Total no. of units 1,000 |
Total sum 1,000 |
Avg. unit cost 0.89 |
Total no. of units 1,125 |
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The above is strictly for information purposes only and should not be considered an offer, or solicitation, to deal in any of the mentioned funds. Investment involves risk, emerging markets may have greater risk than developed markets. Subscriptions may only be made on the basis of the relevant offering documents, most recent annual financial statement and semi-annual financial statements if published thereafter. The value of investments and the income received from them (if any) may be volatile and could change substantially within a short period of time. Past performance is not a guide to future performance. The investment returns are denominated in the base currency of the fund. US dollar / HK dollar based investors are therefore exposed to fluctuations in the US dollar / HK dollar / base currency exchange rate.
BEFORE MAKING AN INVESTMENT, YOU SHOULD REFER TO THE RELEVANT OFFERING DOCUMENTS AND IN PARTICULAR TO THE INVESTMENT POLICIES AND THE RISK FACTORS. YOU SHOULD ENSURE THAT YOU FULLY UNDERSTAND THE RISKS ASSOCIATED WITH THE FUND AND SHOULD ALSO CONSIDER YOUR OWN INVESTMENT OBJECTIVE AND RISK TOLERANCE LEVEL. YOU ARE REMINDED THAT YOU ARE RESPONSIBLE FOR YOUR INVESTMENT DECISION AND SHOULD NOT INVEST UNLESS THE INTERMEDIARY WHO OFFERS OR SELLS THE FUND TO YOU HAS ADVISED THAT THE FUND IS SUITABLE FOR YOU AND HAS EXPLAINED WHY, INCLUDING HOW BUYING THE FUND WOULD BE CONSISTENT WITH YOUR INVESTMENT OBJECTIVE. IF IN DOUBT, PLEASE SEEK INDEPENDENT FINANCIAL AND PROFESSIONAL ADVICE.
This website contains information on Aberdeen International Fund Managers Limited ("AIFML") and the Luxembourg-domiciled mutual fund schemes which it manages. The information and products contained within this website are restricted to investors within Hong Kong. There are important legal and regulatory restrictions which apply to this website. These are laid out in the Disclaimer section which you are advised to read before proceeding. By proceeding, you are representing that you have understood and accepted the restrictions set out in the Disclaimer section.
Third party websites provided by hyperlinks on this website are completely beyond the control of AIFML. Accordingly, AIFML accepts no responsibility for the accuracy, completeness and legality of the contents of such third party website, or for any offers, services and products contained therein.
© Aberdeen International Fund Managers Limited
The above is strictly for information purposes only and should not be considered an offer, or solicitation, to deal in any of the mentioned funds. Investment involves risk, emerging markets may have greater risk than developed markets. Subscriptions may only be made on the basis of the relevant offering documents, most recent annual financial statement and semi-annual financial statements if published thereafter. The value of investments and the income received from them (if any) may be volatile and could change substantially within a short period of time. Past performance is not a guide to future performance. The investment returns are denominated in the base currency of the fund. US dollar / HK dollar based investors are therefore exposed to fluctuations in the US dollar / HK dollar / base currency exchange rate.
BEFORE MAKING AN INVESTMENT, YOU SHOULD REFER TO THE RELEVANT OFFERING DOCUMENTS AND IN PARTICULAR TO THE INVESTMENT POLICIES AND THE RISK FACTORS. YOU SHOULD ENSURE THAT YOU FULLY UNDERSTAND THE RISKS ASSOCIATED WITH THE FUND AND SHOULD ALSO CONSIDER YOUR OWN INVESTMENT OBJECTIVE AND RISK TOLERANCE LEVEL. YOU ARE REMINDED THAT YOU ARE RESPONSIBLE FOR YOUR INVESTMENT DECISION AND SHOULD NOT INVEST UNLESS THE INTERMEDIARY WHO OFFERS OR SELLS THE FUND TO YOU HAS ADVISED THAT THE FUND IS SUITABLE FOR YOU AND HAS EXPLAINED WHY, INCLUDING HOW BUYING THE FUND WOULD BE CONSISTENT WITH YOUR INVESTMENT OBJECTIVE. IF IN DOUBT, PLEASE SEEK INDEPENDENT FINANCIAL AND PROFESSIONAL ADVICE.
This website contains information on Aberdeen International Fund Managers Limited ("AIFML") and the Luxembourg-domiciled mutual fund schemes which it manages. The information and products contained within this website are restricted to investors within Hong Kong. There are important legal and regulatory restrictions which apply to this website. These are laid out in the Disclaimer section which you are advised to read before proceeding. By proceeding, you are representing that you have understood and accepted the restrictions set out in the Disclaimer section.
Third party websites provided by hyperlinks on this website are completely beyond the control of AIFML. Accordingly, AIFML accepts no responsibility for the accuracy, completeness and legality of the contents of such third party website, or for any offers, services and products contained therein.
© Aberdeen International Fund Managers Limited