Do some of these statements sound familiar?

These are some common concerns investors have expressed over the past few months. We’ll explore these concerns in a 5-part email series covering key areas such as market timing, diversification, managing risk, managing market emotions and the benefits of regular investing.

Understanding the value of dollar cost averaging can help clients stay calm and stay invested

Your clients may be nervous about investing during volatile markets, but this is when dollar cost averaging really shines. Dips in the market allow clients to buy more units when prices are low and fewer units when prices are high, which over time may help to smooth out the effects of market fluctuations. 

Let’s compare two investors: Jane and Frank both invest $2,400 in the same fund.* 

Dollar cost averaging 

*The market values quoted are hypothetical and for illustrative purposes only. They should not be considered representative of past or future investment performance.

Jane, shown by the green line on the graph, made a lump-sum investment, purchasing 240 units at $10 per unit. The number of units she owns remains the same throughout the time period. Frank made monthly contributions of $100 for 24 months. Because he bought some units in a market dip, Frank's average unit price was $8.41 and he purchased 285 units. The number of units he owns increases with each monthly contribution, as shown by the blue line. With dollar cost averaging, Frank was able to capitalize on periods of market dips to acquire more units at the end of the period than Jane. 

Share this investor friendly flyer with your clients to show them an example of how dollar cost averaging works and how it can benefit them by;

Bringing discipline to an investment plan 

Helping to avoid timing the markets 

Purchasing more units when prices are low. 

Today’s challenging and volatile markets are an ideal time to discuss the benefits of dollar cost averaging with your clients. 

Winner of 2022 FundGrade A⁺ Awards

We’re pleased to announce Empire Life has won two Fundata FundGrade A+ Awards for the Empire Life Asset Allocation GIF and Empire Life Short Term High Income GIF.¹

These award-winning funds exemplify the Investment team’s disciplined investment style, with a strong emphasis on finding attractively valued, high quality businesses, with a focus on downside protection.

¹ Policies issued by The Empire Life Insurance Company.

Stay tuned for next week’s email about ways to manage risk.