03
Nov 2016

Dollar Cost Averaging 101

Dollar Cost Averaging 101

It’s easier to show how this works, than explain it. Here’s an example of investing $1,000 a month into a hypothetical managed share fund. 

Month

Unit price

Units

purchased

1

$3.00

333.33

2

$2.80

357.14

3

$2.50

400.00

4

$2.60

384.62

5

$2.10

476.19

6

$1.98

505.05

7

$2.30

434.78

8

$2.45

408.16

9

$2.80

357.14

10

$3.00

333.33

Total

3989.74

At the end of the investment period, $10,000 has been added to the portfolio, but because more units were purchased when the market was down, the investor has bought 656 more units than they would have if they had invested everything on day 1. At the end of the time the value of the investment stands at $11,969.22 ($3,989.74 x $3). This is a 19.7% return - even though the unit price has only come back to its starting point.

Dollar cost averaging doesn’t always provide the best outcome or generate a positive return. In a rising market, there will often be periods when it doesn’t pay off. In turbulent times, when markets are flat or declining, dollar cost averaging into a diversified managed share fund may well be the sensible way to unearth those hidden bargains.

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02
Nov 2016

Four Places to Stash your Cash

Four Places to Stash your Cash

If there is a good chance you will receive a tax refund this year or by being thrifty you have accumulated some extra cash in your everyday account, try to contain the temptation to splurge or celebrate; instead make it work harder for you.

Here are some places you can stash extra cash that will pay off in the long run.

  1. Reduce your debts. As boring as it might sound, this is the best way to earn more on your extra cash. Focus on any high-interest loans such as credit cards and personal loans you have. While you’re at it, set up additional monthly payments towards these debts – even a few extra dollars each month will put more back in your pocket.
  2. Special savings. Do you have a special goal like an overseas holiday or wedding? Use your extra cash to open a separate online bank account that earns higher interest and set up a monthly automatic transfer from your everyday account. Allow it to quietly grow behind the scenes and be ready for you when you need it.
  3. Invest it. Use your lump sum to set up a managed investment then make regular contributions to take advantage of dollar-cost averaging. If you’re yet to retire and haven’t already taken control of your superannuation, this might be an even better option for you as it is far more tax-effective. Talk to us for further guidance.
  4. Share it around. You don’t have to be wealthy to be a philanthropist. What is your favourite charity? Or share it between a few needy organisations of your choice. It will not only make you feel good, but you can claim your gift as a tax deduction. You can find more information about planned and tax-effective giving at www.philanthropy.org.au.

Each of these ideas will give you back far more than spending your extra cash on a whim. 

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