How_Money_Works_-_The_Facts_Visually_Explained

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PERSONAL FINANCE

Managing investments

May June July MONTH

INVESTOR B

$200 dollars

buys 10 shares

Investor A

$1,400 buys 70

shares

Investor B

$1,400 buys 73 shares

AVERAGE

PRICE $19.18

$20

VS

Gains three

extra shares

for same

investment

INVESTOR B

$200 dollars

buys 12 shares

INVESTOR B

$200 dollars

buys 10 shares

❯❯DCA can limit gains

in a booming market.

❯❯If the share price rises

gradually over time,

DCA means paying

more per share on

average.

WARNING

❯❯Timing the market to

get the best unit price is

very tricky.

❯❯A fluctuating share

price means a lump sum

pays more per share on

average.

WARNING

“ The individual investor should act consistently

as an investor and not as a speculator.”

Benjamin Graham

WHAT IS MARKET VOLATILITY?

Volatility is the degree of variation

in a trading price over time. It is

measured by looking at the

standard deviation of returns—

that is how spread out returns are

from an average value. Lower

volatility means a share’s price

does not fluctuate dramatically,

but changes in value at a

steady pace.

❯❯Lump-sum investing Although high

returns are possible, putting large single

sums into the market tends to require a

more impulsive, or short-term approach,

which may be counterproductive.

❯❯Market conditions Dollar-cost

averaging means investors do not have

to study the details of market behavior to

maximize their returns.

❯❯Investments from income By regularly

investing directly from regular income,

investors can keep cash on hand for

other purposes or emergencies.

NEED TO KNOW

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