44) Should you do Dollar Cost Averaging with your Bond Fund?

44) Should you do Dollar Cost Averaging with your Bond Fund?

Dollar Cost Averaging is a good strategy in a volatile market. You keep investing regularly over a long period of time. The averaging of the unit prices will give you a good price per unit.

Do you wonder if there is any benefit to do Dollar Cost Averaging while investing into a bond fund?

For Dollar Cost Averaging, the main benefit is you invest in small amount in the volatile market. You do not want to invest in a high price and then price crash after you invested.

Let’s understand how a bond fund perform in the market.

Bond fund performance graph showing upward trend from Jan 2010 to Jul 2017.

From the graph, you will notice that bond funds performance volatility is quite low. There is not much fluctuation. It gradually increases over the months and years.

Therefore you can just invest as early as you can. This will enable you to maximize your investment and let your investment grow as soon as possible. There is no need to do the Dollar Cost Averaging as the lowest prices were at the earlier period.

Be aware the differences between Dollar Cost Averaging (DCA) and Direct Debit Instruction (DDI).
Direct Debit Instruction (DDI) is a good way to accumulate your wealth. You basically instruct the bank to transfer your money for investment on monthly basis.

Most people do not have a large sum to invest. So, a regular small amount deduction will not hurt your expenses budget.  

By using the DDI, you will be able to perform the DCA automatically.  

Please be reminded and be aware that all investments carry risk. Do consult your professional investment and financial consultants.

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