Have you always wanted to begin index investing, but is worried that you might be going into the market at the “wrong” time?
At today’s mark of 3100+, the Straits Times Index is not exactly “cheap”.
Well, there is never a good time, isn’t it? What can you do to overcome this obstacle?
Simple Solution – Systematic Investment
A simple solution would be to invest systematically.
For example, I have saved up $4,000 which I’ll call my Investment Money.
Instead of dumping in the entire $4,000 today and spending roughly $3816 buying 1,200 units of Nikko AM STI ETF (I use Nikko AM over SPDR quite often because of the smaller lot size of 100 units, instead of 1,000), what you can do is to buy 100 units each month at a fixed date instead.
What this does is that it helps you to overcome the psychological barrier of making the “wrong” decision, just in case the market plummets as soon as you make a purchase.
Emotional attachment that could otherwise adversely affect the timing of investments is avoided.
Putting this exact scenario into local context, a DIY approach would require you to have a low-expense account such as Standard Chartered (0.2% per trade), or else you will spend a ridiculous amount on commission executing 12 trades.
Alternatively, you can save the trouble by paying slightly higher fees and relying on the following regular investment plans :
If you embrace Dollar Cost Averaging (DCA), even if you invest at the worst possible time, you would come out just fine. Just check out this case study of starting index investing right before the 2008/2009 stock market crash!