Disciplined Investing is the Way to Go
Patience and discipline is required when investing in unit trusts. You can practise this by adopting the Ringgit Cost Averaging (RCA) strategy via Direct Debit Authorisation (DDA).
Public Mutual’s investment philosophy of investing primarily in stocks with strong fundamentals and resilient earnings, has enabled our funds to ride through challenging periods of market volatility, to deliver commendable performance over the long-term. That said, as an investor, it is important to note that unit trust investment is a form of savings for the long-term. It requires patience, discipline and not being effected by market movements.
One such way to adopt this technique is through Direct Debit Authorisation (DDA), which is an instruction to the bank of your selection to deduct an amount determined by you to be transferred into the unit trust fund of your choice. For example, you can choose to transfer RM500 on a monthly basis or RM1,500 every quarter − the amount and frequency of your investments depend on your financial means and future goals.
- Convenient
A DDA can be done with the bank of your preference to transfer a fixed amount from your savings account into your unit trust investment account. - Affordable
Investing in Public Mutual via DDA starts from as low as RM100 monthly. - Consistent
DDA ensures that you invest consistently. This is a great way to inculcate good saving habits for building wealth. - No market timing involved
The discipline of investing a fixed amount into a unit trust fund over an extended period of time will allow your portfolio to grow steadily with no market timing involved.
With DDA, you will be able to make the most of unit trust investments through an investment technique called RCA. RCA works to reduce exposure to risk that is associated with making a single large purchase.
It is done by investing a fixed amount into a unit trust fund at regular intervals (either monthly or quarterly) regardless of the unit price. Over time, this method lowers the average price per unit of purchase i.e. you will be buying more units when the price is low and fewer units when the price is high.
Let us assume that Investor A set up a DDA for a monthly investment of RM400.
| First 12 months | Table 1: Upmarket scenario |
| Months | NAV per unit (RM) | Monthly investment (RM) | No. of units credited | Units accumulated |
| 1. | 0.5453 | 400.00 | 733.54 | 733.54 |
| 2. | 0.5461 | 400.00 | 732.47 | 1,466.01 |
| 3. | 0.5553 | 400.00 | 720.33 | 2,186.34 |
| 4. | 0.5615 | 400.00 | 712.38 | 2,898.72 |
| 5. | 0.5695 | 400.00 | 702.37 | 3,601.09 |
| 6. | 0.6115 | 400.00 | 654.13 | 4,255.22 |
| 7. | 0.6225 | 400.00 | 642.57 | 4,897.79 |
| 8. | 0.6248 | 400.00 | 640.20 | 5,537.99 |
| 9. | 0.6315 | 400.00 | 633.41 | 6,171.40 |
| 10. | 0.6338 | 400.00 | 631.11 | 6,802.51 |
| 11. | 0.6415 | 400.00 | 623.54 | 7,426.05 |
| 12. | 0.6662 | 400.00 | 600.42 | 8,026.47 |
| TOTAL | 4,800.00 | 8,026.47 |
| Principal investment (RM400 x12) = RM4,800 Units accumulated = 8,026.47 units Average cost per unit = RM0.5980 Average net asset value (NAV) per unit = RM0.6008 |
| First 12 months | Table 2: Downmarket Scenario |
| Months | NAV per unit (RM) | Monthly investment (RM) | No. of units credited | Units accumulated |
| 13. | 0.5453 | 400.00 | 733.54 | 733.54 |
| 14. | 0.5450 | 400.00 | 733.94 | 1,467.48 |
| 15. | 0.5330 | 400.00 | 750.47 | 2,217.95 |
| 16. | 0.5320 | 400.00 | 751.88 | 2,969.83 |
| 17. | 0.5210 | 400.00 | 767.75 | 3,737.58 |
| 18. | 0.5200 | 400.00 | 769.23 | 4,506.81 |
| 19. | 0.5185 | 400.00 | 771.46 | 5,278.27 |
| 20. | 0.5100 | 400.00 | 784.31 | 6,062.58 |
| 21. | 0.5025 | 400.00 | 796.02 | 6,858.60 |
| 22. | 0.4997 | 400.00 | 800.48 | 7,659.08 |
| 23. | 0.4970 | 400.00 | 804.83 | 8,463.91 |
| 24. | 0.4960 | 400.00 | 806.45 | 9,270.36 |
| TOTAL | 4,800.00 | 9,270.36 |
| Principal investment (RM400 x12) = RM4,800 Units accumulated = 9,270.36 units Average cost per unit = RM0.5178 Average net asset value (NAV) per unit = RM0.5183 |
In the first 12 months during upmarket trend, Investor A managed to accumulate a total of 8,026.47 units at an average cost of RM0.5980 per unit, which is lower than the average NAV per unit of RM0.6008. During the next 12 months when the market as on a downtrend, Investor A managed to accumulate a total of 9,270.36 units at an average cost of RM0.5178 per unit, which is once again lower than the average NAV per unit over the period at RM0.5183.
The illustration shows that through disciplined investments over an extended period of time, the average price per unit of purchase will be lowered. It must be noted that the above scenario is just an example to provide an understanding of RCA. In actual practice, the significant lowering of cost per unit will be more evident over the medium- to long-term period.
Building wealth by investing in unit trusts is a matter of patience and persistence. Save and invest with DDA to make the most of your investments.
This article is prepared solely for educational and awareness purposes and should not be construed as an offer or a solicitation of an offer to purchase or subscribe to products offered by Public Mutual. No representation or warranty is made by Public Mutual, nor is there acceptance of any responsibility or liability as to the accuracy, completeness or correctness of the information contained herein.