Dollar-cost Averaging Can Improve Returns in Turbulent Times
We are going through extremely uncertain times, with markets experiencing high volatility and investors unsure whether markets will go up or down. This is a good time for people to look at the option of saving on a regular basis as it is actually possible to benefit from this volatility. Saving can be done on a monthly, quarterly or annual basis.
In times of high volatility or falling equity values, the natural urge for many is to re-direct regular investments to safer and less risky investments.
But, for regular savers, falling values may actually be a good thing over the medium to long term.
During times of high volatility even blue chip funds are likely to experience price fluctuations over an extended period. As prices drop, consistent savers can buy more units for their dollar.
Then, over the medium to long term, if and when the value of these units recovers, the regular saver can reap the rewards of having accumulated more shares at a lower price.