WHY POUND COST AVERAGING (PCA) MATTERS
WHAT IS PCA?
THE BENEFIT OF PCA
THE BENEFIT OF PCA
Pound cost averaging (also known as Dollar Cost Averaging in the US) is the practice of systematically investing equal amounts of money at regular intervals, regardless of the price of a security. PCA can reduce the overall impact of price volatility and lower the average cost per share.
THE BENEFIT OF PCA
THE BENEFIT OF PCA
THE BENEFIT OF PCA
In PCA, for the same monthly amount, the investor buys more units when the price is low and less units when the price is high.
PCA takes out the risk of timing the market and losing out if the wrong call is made. It is a low risk method of regular, un-interrupted investing.
WHY COSTS MATTER
DON'T TRY AND CATCH A FALLING KNIFE
DON'T TRY AND CATCH A FALLING KNIFE
DON'T TRY AND CATCH A FALLING KNIFE
Investors must never seek to "time" the market. This is where someone tries to bulk buy units when the price has fallen to a nadir and then tries to sell units when the price has peaked.
As no one can foresee market movements, this is never an advisable strategy and can often lead to miscalculations.
USE PCA TO YOUR ADVANTAGE
DON'T TRY AND CATCH A FALLING KNIFE
DON'T TRY AND CATCH A FALLING KNIFE
Understanding the benefit of PCA means that you are better prepared to adjust to the ups and downs of the equity markets. Always drip feed a small amount every month and pay no heed to what the markets are doing or thinking.
Having a steady, even keel will help investors weather any financial storm.