INVESTING STRATEGY
Lump sum investment and investment frequency
Hi guys! I am 36 Yr M. Looking to dissolve my stockspot portfolio (c.30k) due to below average performance, since I started investing in it in 2021. It just wont grow! Where my DIY portfolio is doing much better than it. I believe that I will be better off investing that money in my DIY ETF though pearler. Have worked that one year returns will be more than enough to cover the CGT. My pearler a/c is currently set on auto invest in 4 etf’s and one trade is done per month to buy the holding that is the furthest away from its % allocation. 1) My question is that should I: a)Just buy those 4 etf’s straight away in their corresponding proportions when I get the money, irrespective of the prices on the day. OR b) Should I just add like 2-3k extra each month to the auto invest account so that I can get the $ cost avg benefit. 2) I have set the auto invest in a way that it buys one etf per month. If I am investing $1000 per month and per trade cost is 6.5$, is one trade per month ok or shall I do 2 trades per month for better $ cost averaging? I have set it to one trade per month purely to keep the cost of investlemt low. Appreciate your thoughts, Thanks!
2 Comments
10 months ago
Great question Sagar.
These are just my thoughts on it, others may see it differently…
1- Consider the pros and cons of investing the money straight away in the chosen allocations and go from there. The reason being, there is going to be a decent chunk of money leaving Stockspot and so it will be uninvested for a period of time. There’s no advantage to spreading the new purchases out, since more often than not, the market goes up.
2- Consider the pros and cons of keeping it simple with 1 trade per month to avoid the extra brokerage. Some people find more frequent purchases more enjoyable, but the benefit of getting money invested sooner will be outweighed by the higher brokerage costs (1 per month vs 2). Especially at a level of $1000, it’s not very efficient to split that into two monthly purchases.
Remember, because you’re investing every month you will continue to get the benefit of dollar cost averaging – which really just means buying more shares with your dollars when the market goes down. It’s a smart approach, but still the stats show that over time, the probabilities say money should be invested sooner rather than later.
Hope that makes sense :)
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ReplySagar
INVESTOR
10 months ago
You’re a legend mate. Appreciate your thoughts. Ps: love your content and podcasts 😀🙌🔥
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