The strategy of making regular deposits into an investment even when markets move against you remains a compelling choice for investors.
The first half of 2022 was a rollercoaster ride on the markets, with the big sell-off being in June. Since then, share prices have recovered, highlighting that you should never throw logic out the window when investment markets are volatile.mean that sticking with a disciplined contributions strategy remains compelling even when markets are moving against you.
Unfortunately, these approaches are flawed and can create “investor paralysis”. Delaying investing may mean missing out on participating in the upside when markets rebound.dollar cost averagingImportantly, this investment method can reduce the risk of investing during times of market volatility. It also helps avoid the pitfalls of attempting to time entry into markets.
Joan’s initial $40,000 investment acquires 40,000 units. The second $40,000 buys 57,143 units at 70¢; the third $40,000 gets her 50,000 units; the fourth buys 44,444 units; and the final $40,000 investment gets her 36,363 units at $1.10. Joan ends up with 227,950 units in the managed fund and has a better outcome because her investment is worth $250,745.
The good news is that dollar cost averaging is how most wage earners invest in super – via their employer’s regular compulsory super contributions. In addition, most salary sacrifice contributions are made via regular contributions.
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