Pound Cost Averaging (JAN 2021)

At Professional Capital, we pay close attention to the effects of pound-cost averaging and reverse pound-cost averaging (sequence of returns). The bottom line is that these realities have the power to increase or decrease the performance of your investments.

We don’t stop at paying attention to these important factors, we take action on behalf of our clients utilising a number of investment strategies to reduce investment risk. 

So, what is pound-cost averaging? The technique of buying a fixed pound amount of a particular investment on a regular schedule, regardless of the share price. 

The problem with investing a lump sum of money is that should the price per share drop dramatically, the entire lump sum will be greatly reduced in value. Pound-cost averaging helps protect against this possibility by dividing up a lump sum and investing the portions over time.