About Dollar Cost Averaging
By making regular monthly contributions into segregated funds you benefit from one of the greatest tools available to a long term investor, dollar cost averaging. In a segregated fund you are purchasing units of value.
The strategy of dollar cost averaging is the investment of the same number of dollars at regular intervals, regardless of the price of the investment units being purchased. Because more units are being purchased at lower unit prices than higher unit prices, one can reduce the average cost of the investment. Dollar cost averaging removes the market timing problem by imposing discipline on your investment program.
The following hypothetical table demonstrates how dollar cost averaging works over a 12 month period with $100 per month invested consistently.
The average unit price over 12 months was $10.00 per unit [unit price totals divided by the total number of months]. The investor's average cost to purchase these units was $9.60 per unit [total investment divided by total units purchased]. As you can see, the average cost per unit was lower than the average unit price over the time period covered. The investor was able to purchase more shares when the share price dropped and fewer as it rose.
Dollar cost averaging requires discipline and consistency. This strategy is not designed for short term profits, but for accumulating assets over the long term.
Subject to the applicable death and maturity guarantees, any part of the premium or other amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value according to fluctuations in the market value of the assets in the segregated fund.
Segregated Funds are only available to Canadian residents. Persons resident or located in other countries are not eligible to purchase these products or associated services. Within Canada, the information on this web site is not intended to be construed as an offer to sell any insurance products in the province of Quebec.
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