Chapter 4
Chapter 4 ââÅ¡¬ÃƒÆ’…No timingââÅ¡¬ Effect:
Don't worry about when to start
Many people probably worry about the best time to start investing. But with DCA investing, you don't have to.
Consider a financial instrument with a price fluctuation as shown in the graph above. Although its movement over a period of only 10 years is represented, it continued to go up much the same way beyond that point. If a DCA investment over those 10 years was made and the numbers on the line represent start-up time options at 6-month intervals, at which point do you know you should have started to get the most out of your investment? What do you think? The answer is 2. As a reference, the order from most to least lucrative start point is 2,3,1,4,5,6,7,8,9. You see that performance varies depending on the start-up timing. Changing the starting point would simultaneously change the amount of units you can purchase as well as the price. Ultimately, the value of the investment is decided by the result of ââÅ¡¬ÃƒÆ’…amount x price,ââÅ¡¬ so both of these factors are essential. When you invest, you would probably consider starting at a low point, right? If making a one-time, lump-sum investment, the start-up timing is very important because the outcome depends solely on the price with the number of units staying exactly the same. (Formula: Investment Value = Amount x Price) But this is not the case for DCA investing. There is no need to fuss with starting time. Why do I know this? Think for a moment. With DCA investing, when you start is only one of multiple times when units are purchased. A DCA investment spanning 10 years would provide 12 unit purchasing opportunities per year, 120 times in total. The start of the investment is but one of 120 buying times, so it has a very small effect on the overall results of the investment.
starting at the lowest price doesn't necessarily provide favorable results and starting at a high price won't guarantee anything either. In the final analysis, results vary because the number of units of a fund we can purchase depends solely on how the price fluctuates after starting. The best timing is only revealed retroactively. The time you start investing is but a single timing among multiple purchasing opportunities. So there's no point worrying about it. The best thing to do is starting early and buying as many units as possible. DCA investing provides the best results when starting as soon as possible.
Selanjutnya: Chapter 5 ââÅ¡¬ÃƒÆ’…No predictingââÅ¡¬ Effect
