The unit trust sales in Malaysia is meeting new height every year. Thanks to the awareness of the public and also the hardworking sales force.
For investor of unit trust, Ringgit Cost Averaging (RCA) is a common term. It means investing regularly with a fixed amount of money periodically for long term.
More about RCA illustration, can refer:
CIMB Asset Management
Affin Trust Management
The advantages of this strategy are simply:
1. buy more when it is cheap
2. buy less when it is expensive
3. not much to worry about timing the Mr. Market
Even if you invest in share directly, you can also apply the Ringgit Cost Averaging strategy.
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one question.
if I have 12k RM
If I use RCA, I put 1k per month and I might benefit from the pricing.
If I put 12k a lump sum as initial capital, I will get the benefit of full year return for my 12k.
Both seems to be beneficial strategy, but which one is the better choice?
Hi Relax,
if you invest lump sum, it is riskier than RCA because if the market doesn’t perform as you expected, your return of the year might be lower than RCA.
Of course, there is no right or wrong. But try not to time the market. Even Warren Buffett never does that.
The easiest way for passive investor is:
1. Invest according to your asset allocation all the time
2. If you have 12K, no need to wait to do RCA, just invest fully according to your asset allocation – e.g. 10% cash, 30% bond, 30% local equity, 30% foreign equity etc.
3. Keep investing whenever you have money, and according to the asset allocation.
4. Rebalance your portfolio from time to time, maybe once a year.
Then you will be doing lump sum investment plus the benefit of RCA because you do it regularly.
KC