TORONTO, ONTARIO -- (Marketwire) -- 02/01/13 -- BMO InvestorLine reminds Canadians of the value of implementing a dollar-cost averaging (DCA) investing strategy to their portfolio, particularly given the volatile market environment.
DCA involves investing a fixed amount of money on a regular basis - whether the market is up or down - over a specific period of time. As a result, an investor buys fewer shares when prices are high and more when prices are low.
"Over a longer time horizon, this strategy offers the potential to accumulate more shares of a company or units of a fund at a lower cost per share than if invested as a one-time, lump sum," said Viki Lazaris, President & CEO, BMO InvestorLine. "By investing systematically, an investor will be less tempted to make decisions on the basis of short-term events and their emotions. As a result, their fortunes will not depend on their ability to make the right call, at the right time, about future trends."
BMO's Psychology of Investing Study found that two in five Canadians investors (40 per cent) say that their emotions play a role in their investing decisions. The study also revealed that nearly 60 per cent of Canadians say they have invested on impulse at least once.
To maximize savings, and help keep emotions in check, Ms. Lazaris offers the following tips to make the most of DCA:
Invest Long Term: A DCA investor decides the time horizon over which all of the investments are made. With a shorter time horizon, the strategy will be more similar to lump-sum investing; as a result, investors may not reap the averaging benefits of DCA.
Maintain Market Awareness: Since DCA involves continuous investing regardless of fluctuating prices, keep actively investing on your own through periods of low price levels.
Acknowledge the tradeoff: If markets trend upward, you would have been better off investing the entire lump sum as early as possible. And if prices move steadily downward, you would have been better off investing the lump sum near the bottom. But unfortunately no one can predict the future, and using a disciplined strategy like DCA is likely to deliver better long-term results than trying to time the market.
Consider pre-authorized contributions: BMO InvestorLine's Self Directed and adviceDirect services offer clients the ability to set up regular, intervalled contributions so they can benefit from DCA.
For more information on online investing, please visit www.bmoinvestorline.com.
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About BMO InvestorLine
BMO InvestorLine is an online investing service that provides clients with two ways to invest online. Clients can choose from BMO InvestorLine's top ranked Self-Directed service that provides tools to help investors make independent decisions on how to invest. BMO InvestorLine's other service, adviceDirect provides investors with online advice and investment recommendations for their portfolios. Clients have access to trading, quotes and account information 24 hours a day through a website or Automated Telephone Trading. BMO InvestorLine also provides users with third party research, along with leading edge tools that are informative and easy to use. As an all-in-one investment source, it is a constantly evolving, cost-efficient platform that is fully compatible with tablets.
BMO InvestorLine Inc. and BMO Ligne D'action Inc. provide this commentary to clients for informational purposes only. The information contained herein is based on sources that we believe to be reliable, but is not guaranteed by us, may be incomplete or may change without notice. The comments included in this document are general in nature, and professional advice regarding an individual's particular position should be obtained.
An adviceDirect account is a non-discretionary fee based account which offers investment recommendations. adviceDirect does not provide portfolio management by a portfolio manager. The client makes their own investment decisions and manages their own investment portfolio. adviceDirect does not offer discretionary, managed accounts.
BMO InvestorLine Inc. is a member of BMO Financial Group.
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