Putting your money to work – one step at a time
“Never try to time the market.” It’s one of the golden rules of sound investing, and for good reason.
No one knows exactly when the market will go up or down, or how far. Worse, most people who jump in and out of the market in an attempt to capture upswings and avoid downturns end up doing the exact opposite of what they intend. Instead of buying low and selling high, they sell out of fear when their investments drop, and buy again after prices have risen. In other words, they sell low and buy high.
Dollar-cost averaging is a simple, set-it-and-forget-it way of investing on a regular basis. It also gives you the potential to “buy low” when markets go down, without having to attempt to time the market or even pay any attention at all to what the market is doing.
Let’s look at a simple example of how dollar-cost averaging works.
Every week Cathy buys $250 worth of units in the IA Clarington Canadian Balanced Fund, regardless of what is happening in the market. When the market is sluggish and the Fund’s unit price drops, her $250 investment may buy 13 or 14 units. Conversely, when the market is at or near a peak and the unit price is higher, her $250 may buy only seven or eight units.
For illustration purposes only.
By committing to a weekly investment schedule, Cathy may have the opportunity to buy more units when prices are low – without trying to time the market or even glancing at the current price of her mutual fund.
iA Clarington dollar-cost averaging service
iA Clarington’s dollar-cost averaging service is simple and convenient. Here’s how it works:
- You put a lump sum into the IA Clarington Money Market Fund. (A money market fund invests in short-term, fixed-interest instruments, and can be easily sold at any time). It’s usually considered a good place to park money in the short term.
- Over the course of a year, that money is switched into an eligible iA Clarington fund of your choice in equal amounts on a weekly basis.
- At the end of the one-year period, your original amount is completely invested in the iA Clarington fund you have chosen.
You can participate in the iA Clarington dollar-cost averaging service with an initial investment of as little as $1,000.