Volatile Market For Unit Trust
The market has been very volatile, but my Latin America unit trust is still holding up well. The gold unit had declined but it’s still up. Except for Singapore/Malaysia, the rest of my unit trusts are still doing fine. I’ve sold off the China unit trust.
How much do you want to earn before you sell off your unit trust? 20%?
I guess it all has to do with the fundamentals of the market. If everything is right, then it has the potential to increase more than 20%.
If you keep buying and selling, you have to pay for the sales charge.
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I am of the feel that the markets are of good valuations now as of Jul2008, and expected to be volatile for next 24 months or so.
Inflation will hover around 5-6% p.a for next 24 months, and hence for people who are non-full-time-traders, i.e normal working people, the best option seems to be: Dollar-cost averaging or “Drip in money” strategy.
One of the ways to deal with volatility on the markets is to use dollar-cost averaging (or some call it “dripping in money”).
“Dripping in money” reduces market-timing risk by participating in the market through the up and down cycles.
I have created a matrix which you can use to easily calculate how much you need to invest per month to achieve a desired amount in XX number of years.
http://www.waynekoh.com/2008/07/drip-in-new-money-part-3.html
Example: You want to achieve S$1mil in 30 years, and you can achieve 8% per year.
Spot the figure in the matrix (Row:30 yrs; Column:8%)=1359.60
use S$1mil to divide by 1359.60 = $736.00
therefore, $736 is required monthly in a dollar-cost averaging mode (I call in “Dripping in Money”) to achieve S$1mil over 30 years.