PIS recommends age-old strategy

Robbie Bennetts

As Australia’s stock market continues to fluctuate, financial advisers should include dollar cost averaging in their clients’ investment portfolios, according to Professional Investment Services chief executive Robbie Bennetts.

Dollar cost averaging involves the purchase of securities in fixed dollar amounts at regular intervals on the belief that the average value of the investment will increase over time.

Bennetts claims this strategy would offset market volatility as funds are invested over a set time period rather than in a lump sum.

“With the number of changes occurring in investment products, the increasing complicity of product structuring and the constantly changing playing field of financial planning strategy, dollar cost averaging into volatile markets makes sense, rather than trying to market time the peaks and troughs,” Bennetts said.

“Recent stock market activity proves how hard it is for experts to predict which way the market will turn, let alone individual investors.”

Bennetts added that self-managed superannuation fund investors could also benefit from the investment strategy.

“Dollar cost averaging is also a viable strategy for all those self-managed superannuation funds that are currently flush with cash waiting to be invested following the unprecedented levels of inflows that occurred prior to June 30 as investors topped up their super to take advantage of the significant tax incentives arising from the Government’s ‘simpler super’ reforms.”