Dollar Cost Averaging (DCA): A Proven Strategy for Malaysian Investors
•By Mahersaham Team
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Dollar Cost Averaging (DCA) and Regular Savings Plan (RSP) are truly the BEST strategies for retail investors like us who want to build long-term wealth consistently. No need to wait until you have a large sum of money, no need to become a technical analysis expert, and most importantly — you can SLEEP SOUNDLY even when the market drops suddenly!
DCA is a simple concept. You set a fixed amount of money and invest it consistently at regular intervals — whether weekly, monthly, or quarterly.
Example: Say you have RM500 per month to invest in a KLCI-ETF. Regardless of whether the unit price is RM1.00, RM1.20, or drops to RM0.80, you still invest that RM500 every month.
When the price drops, you get more units. When the price rises, you get fewer units. On average, the price per unit you pay will be lower compared to someone who tries to "time the market".
THIS IS A FACT, NOT AN OPINION!
RSP is essentially the automated version of DCA offered by financial institutions. Your bank or investment company will automatically deduct money from your account every month and invest it into the fund of your choice.
Why is RSP EXTREMELY USEFUL?
It is not much different from investing in EPF (KWSP), because every month you are required to contribute and EPF invests your money continuously.
Because they are NOT CONSISTENT! When the market drops, they panic and STOP their contributions. This is the BIGGEST MISTAKE. Remember, when the market drops, that is the best time to acquire more units at a cheaper price!
Many are also impatient. DCA is not a get-rich-quick strategy. This is a strategy for building wealth CONSISTENTLY over a period of 10–20 years.
If you want to learn other techniques as well, for example How to Profit in Stocks with the 5T Formula.
For those still unconvinced, try calculating the results of investing RM500 per month for 20 years with an average return of 7% per annum. The result is nearly RM250,000 even though you only invested a total of RM120,000!
In closing, successful investing is not about having a high IQ or advanced technical knowledge. It is about CONSISTENCY and EMOTIONAL control. DCA and RSP are the best ways to achieve both.
These examples are taken from Investopedia.
The Dollar Cost Averaging or Regular Savings Plan technique ensures that you do not need to worry about when to invest in the market, or whether your timing is right or wrong.
However, if you know the market is indeed performing poorly but are unsure how long it will last, implementing this strategy ESPECIALLY during a market downturn will yield even better results.
Stocks are about probability. By gaining knowledge, you increase your probability of profiting consistently in the stock market.
DCA (Dollar Cost Averaging) is a strategy where you invest a fixed amount at regular intervals regardless of the market price. RSP (Regular Savings Plan) is the automated version of DCA offered by financial institutions, where deductions are made automatically every month to be invested in your chosen fund.
You can start DCA with as little as RM100 to RM200 per month. What matters is the consistency of investing every month, not the size of the amount. Over time, the power of compounding will cause even small investments to grow significantly.
Yes, in fact DCA is more profitable during a market downturn because you will acquire more units at a lower price. When the market recovers, your average cost will be much lower compared to investors who try to time the market. This strategy eliminates emotional stress during volatile markets.
Yes. DCA can be applied to individual stocks, ETFs such as the KLCI-ETF, or unit trusts on Bursa Malaysia. Ensure you select counters with strong fundamentals and a consistent track record for optimal long-term results.
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