Ringgit Cost Averaging is an investment technique intended to reduce exposure to risk associated with making a single large purchase by investing a fixed amount on a particular investment (such as unit trusts) at regular intervals (either monthly or quarterly), regardless of the unit price. For example, you can choose to transfer RM100 to RM 200 from your paycheck to a unit trust fund or you can even make a RM500 or RM1,000 investment every quarter. The amount and frequency of your investments depend on your financial means and future goals.
HOW RINGGIT COST AVERAGING WORK?
More units are purchased when prices are low, and fewer units are bought when prices are high. The premise of ringgit cost averaging is that the investor wants to safeguard against the market losing value shortly after making his or her investment. Furthermore, you must continue to purchase units both in market uptrends and downtrends in order for the strategy to be effective. Hence, you should choose an amount which you feel comfortable investing under all market conditions.
| Month | Investment | Price | Number |
| Amount | Per Unit | of Unit | |
| (RM) | (RM) | Purchased | |
| January | 1,000 | 0.2549 | 3,923.11 |
| February | 1,000 | 0.2261 | 4,422.82 |
| March | 1,000 | 0.2068 | 4,835.59 |
| April | 1,000 | 0.1846 | 5,417.12 |
| May | 1,000 | 0.1645 | 6,079.03 |
| June | 1,000 | 0.1589 | 6,293.27 |
| July | 1,000 | 0.1477 | 6,770.48 |
| August | 1,000 | 0.1617 | 6,184.29 |
| September | 1,000 | 0.1947 | 5,136.11 |
| October | 1,000 | 0.2035 | 4,914.00 |
| November | 1,000 | 0.2248 | 4,448.40 |
| December | 1,000 | 0.251 | 3,984.06 |
| 12,000 | 62,408.28 |
| Average Unit Price | RM 0.1983 |
| Average Unit Cost | RM 0.1923 |
| Current Unit Price | RM 0.2510 |
| Current Value Of Investment | RM 15,664.48 |
In this example, the average unit price over the period was RM0.1983 but the average cost to you was RM0.1923, resulting in a 3% lower price to the average unit price over the period.
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