What is Peso Cost Averaging and How does it Work?

What is Peso Cost Averaging and how does it work for investments?

We are sure that you always read or hear about Peso Cost Averaging but you’re wondering how it works, how it makes money, why it’s important, why lots of investors are applying it on their investments and why you should too.

Peso Cost Averaging is a method of investing wherein you buy shares of stocks or units of funds regularly over a period of time. You can place funds or buy shares every month or twice a month or every time you have money. It’s up to you when as long as you invest regularly and periodically until your target time or until your investment goal has reached its target period.

How to Invest using Peso Cost Averaging?

You must decide and determine the following:

• ·  How much money you want to invest (P5000, P10,000, P20,000 etc.) – We recommend to invest at least 20% of your regular income

• ·     When do you plan to invest it? (1x, 2x, 3x a month, weekly, quarterly etc.)

• ·    Your target time – How long do you want to keep your funds invested? The longer the time, the better.

How will you make money and earn using PCA?

It is very important to invest with the right financial companies to receive great returns or profit. If you are investing on Mutual Funds, choose the best mutual fund companies because they have already proven great track records.

If you’re investing in the stock market, choose the giant companies or the blue chip companies that you are sure would be here for another 50 years or so. These big companies have excellent growth stocks track records.

Because you invest regularly, you are adding and putting up more shares or units of investments on your funds whether the market is up or down. You are also minimizing risks by maximizing your earnings and letting them grow over time.

Peso Cost Averaging Computation:

Here’s how PCA works relating to stock investments. In the sample below, assuming a person decided to use around P5000 to buy stocks every 30 days. Notice that whether price of stocks is high or low, he will still gain profit in the end.

We therefore conclude that Peso Cost Averaging is a very reliable and a safer method of investing because you will earn money in the long run.

We hope that you learned something today! You may suggest a topic via comment box below. Thank you for visiting our website!

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