Talked to Victor, my financial planner today about investment stuff, and realized that there is really too much information about investment instruments to finish absorbing and understanding. Probably its because of different schools of investing philosophies, like the value investing-kind from Warren Buffet, different opinions about dollar cost averaging and investing 1 lump sum.

Something that I have learned today and my thoughts about it. Since my little knowledge about unit trust investing, I can say that I have truly felt the impact of using dollar-cost averaging and investing lump sums in different phases. For $$-cost averaging, it is said that it takes away the investor's greatness weakness : emotions. I like to see the market as being controlled by human emotions, and they tend to overreact to good or bad news. So dollar-cost averaging (DCA) eliminates that part. By setting aside a fixed amount of money every month and investing it at regular intervals, the investor don't have to care if the market is in a boom or bust. Hence, this technique will allow one to buy more units when the fund price is down, less when the price is high.

However, I personally feel that this method only works if and only if, the fund is in a long-term upward trend. Think about it, if the fund price is tanking every month for say, 3 years due to recession or mismanagement by the fund manager, will DCA work? You are buying a fund that has its price tanking all the time, it is highly unlikely that you will make a profit when you sell them at the end of 3 years. Another point is, DCA requires little supervision, just pumping money in every month, isn't that what your fund house or financial planner wants!!! So when bad things happen, you don't even know!! How many people actually forget what happened in 2000 when the tech bubble bursted, will DCA help out at that time? NOOO!!

Well, I have done a bit of both to see for myself what really works. Investing in phases will require experience and maybe (in my view) timing the market. Though many investors, including Warren Buffet, said that one who times the market will always lose out in the end. History has supported that this is usually true. I don't really know how to explain it myself. Will get back to it later.