Pound Cost Averaging

Pound cost averaging is best described as the technique of choosing to make your investments on a regular basis and averaging out the cost of your total investment over time. If you invest the same amount of money each month and the share price is down you get more for your money than when the share price is rising. This technique can iron out the ups and downs of a share or fund price over time, and can take away the worry of finding the right time to invest.

Investing little and often is a good way to take the first steps towards building a portfolio for the long-term future.

Month

Share Price

    Regular Investment Shares Purchased   One off investment Shares Purchased
1 £5.00     £100 20   £500 100
2 £4.50     £100 22      
3 £3.50     £100 29      
4 £4.00     £100 25      
5 £5.00     £100 20      
Average £4.40 Totals   £500 116   £500 100
        Value of shares at month 5 £580   Value of shares at month 5 £500

 

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