AIA Malaysia

AIA Investment Funds: Dollar Cost Averaging

Picking the bulls and bears of the market is a difficult task. By investing regularly over a medium to long term period, you can remove the need to forecast the market by making buying decisions systematically and achieve growth in your investments at lower cost through Dollar Cost Averaging.

Dollar Cost Averaging is based on the economic fact that if you buy a security of which price varies up and down with a fixed amount of money at fixed intervals, you will automatically buy more every time prices fall, and buy less when prices are high.

In the following scenario, you pay RM2,000 premiums in year one (1) and the unit price of the fund you are investing in is RM1.30 per unit. You will receive 1,538 units. Taking the extreme, if the unit price drops in year 2 to RM1.00, you will receive another 2,000 units. If the fund performance peaks in year five (5), you will receive 1,111 units that year.

The results in year five (5)? You will own 7,800 units with a total investment of RM10,000 over five (5) years. Despite drops in unit prices in year four (4) and year two (2) [compared to the unit price of RM1.30 that you paid in year one (1)], with the ending unit price of RM1.80, your units are worth more than what you paid for them. The average unit price over the five (5) year period was RM1.34, but the average unit cost to you is RM1.28. Additionally, your fund value at year five (5) is RM14,040, representing a 40.4% growth over your total investment of RM10,000. As you see, Dollar Cost Averaging can work for a consistent investor over a period of time.

Example of Dollar Cost Averaging

Year Annual Premium Paid (RM) Unit Prices (RM) Units Purchased
1 2,000 1.30 1,538
2 2,000 1.00 2,000
3 2,000 1.50 1,333
4 2,000 1.10 1,818
5 2,000 1.80 1,111
Total 10,000 6.70 7,800
  • Average Unit Price over the five (5) year period is RM1.34.
  • Average Unit Cost to you over the five (5) year period is RM1.28.
  • Your fund value at year five (5) is RM14,040.
  • Gains after five (5) years 40.4%.

(If you are planning to make Dollar Cost Averaging part of your investment strategy, please note that it does not guarantee profit or guard against loss)

Click here for Investment Funds Unit Prices.

Important: This is purely a product summary and shall under no circumstances be used or deemed as an offer to sell nor shall it be taken as a form of professional advice of any manner. Please contact us at 1-300-88 1899 for more information.

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