Dollar-cost Averaging

Dollar-cost averaging is a prudent technique of buying a fixed amount of a particular investment on a regular schedule, regardless of unit price; thus purchasing more units when prices are low, and fewer units when prices are high. The dollar-cost averaging effect averages out the costs of your units and therefore reduces the effects of short-term market fluctuation on your investments.

To make profit in investment, it is often said that you need to "buy low and sell high". However, it is difficult to know when is the right time to buy or to sell. Dollar-cost averaging investments lessen the risk of investing compared to investing a large amount in a single investment at a, perhaps unfavourable, time. As you make regular contributions to your MPF fund at regular intervals, you are effectively practising dollar-cost averaging without even thinking about it.

To achieve the benefits of dollar-cost averaging, you must invest a regular amount in an MPF fund at regular intervals, typically monthly, and continue to acquire fund units irrespective of the fund unit prices.

Whilst dollar-cost averaging reduces the effects of price fluctuations, this does not mean that it guarantees any gain. When an MPF fund's price declines over the investment period, the average cost will still be lower than the average price, however, you may still have an overall loss in the value of the MPF fund. The strategy offers no guarantees that you will make a profit on the investment or be protected against a loss.