Please note this page is still under construction...
Unit Cost Averaging
Putting some money into your funds on a regular basis lets you take advantage of dips in price to 'average' out the cost of your funds. For example, if you put $100 into a fund where units (or shares) are $10 each, you get 10 shares. Now imagine the price plunges 50% - units are now $5. If you were planning to 'buy and hold', this is a disaster. But, if you buy again, this time your $100 buys you 20 shares.
So now, you have invested $200, bought 30 units and your average price is just $6.66 ($200/30 = $6.66). Even if the price recovers to $7.50 - still 25% below where you initially bought - your investment is profitable. Regular contributions especially when the market is going down is key to your long term investment success.
Mutual Funds
A little bit of lots of different companies. These make investing in a diverse portfolio of even expensive stocks accessible to the everyday investor.
Compound Growth (from Investopedia)
Suppose you invest $10,000 into Cory's Tequila Company (ticker: CTC). The first year, the shares rises 20%. Your investment is now worth $12,000. Based on good performance, you hold the stock. In Year 2, the shares appreciate another 20%. Therefore, your $12,000 grows to $14,400. Rather than your shares appreciating an additional $2,000 (20%) like they did in the first year, they appreciate an additional $400, because the $2,000 you gained in the first year grew by 20% too. If you extrapolate the process out, the numbers can start to get very big as your previous earnings start to provide returns. In fact, $10,000 invested at 20% annually for 25 years would grow to nearly $1,000,000 (and that's without adding any money to the investment)!
