When investing in Mutual Funds, you need to think about the right strategy. One type of strategy that can be applied in this investment is averaging up.
This approach has already been used quite often and has become one way to accumulate long-term assets. Let’s find out more about the averaging up strategy.
What Is the Averaging Up Strategy?
You first need to understand what is actually meant by the averaging up strategy. It is a strategy where investors add to their position when a stock’s price is rising.
This strategy is indeed more commonly used in the stock instrument, considering this instrument can experience significant fluctuations. So, when stock prices go up, investors will increase their purchases to enlarge profits.
In the world of Mutual Fund investment, this method is also used quite a lot and is indeed considered effective. Stocks are one of the asset types inside Mutual Fund instruments, so this strategy remains relevant.
Along with the potential for high returns, there is certainly also high risk. That is why averaging up must be carried out with careful consideration, and you must also understand the risks that have to be borne.
Advantages of the Averaging Up Strategy
Every step or strategy you take in investing always has pros and cons. The same goes for the averaging up strategy there will definitely be advantages and disadvantages.
Before relying on the averaging up method in your investment, it is best to first find out its advantages what makes many people choose to apply this strategy to obtain profit.
Below are several advantages of the averaging up strategy in investing that you need to know.
● Able to Leverage Market Momentum
This strategy can help you take excellent advantage of market momentum. When stock prices are quite high, you can use that momentum to gain a more sizable profit outlook.
Averaging up is also considered very good to apply when you are investing in stocks with solid fundamentals. For example, blue-chip stocks that have strong and consistent upward momentum.
This will greatly help you obtain a much larger profit outlook in the future—especially if you dare to take risks and hold assets in the right stocks.
● Potential for More Optimal Profits
Averaging up has proven more effective in providing the potential for optimal profits. However, of course, this goes back to the stock choices you use.
For most investors, this strategy is considered a favorable buying point. Particularly if the market trend is positive, this strategy will be very effective in providing optimal gains.
The profit potential can be more optimal because you make purchases gradually while stock prices are high. You can hold stocks at a higher average price when their value continues to increase.
● Focus on Prospective Asset Types
Applying averaging up also helps you focus more on prospective asset types. As we know, there are currently so many kinds of assets that can be invested in.
Making wise and smart choices is very important so that investment gains can be more optimal. In this case, you can focus more easily if you use the averaging up strategy correctly.
Generally, price increases occur in prospective stocks. However, be sure to remain cautious and carefully assess which stocks truly have strong fundamentals.
● Helps Improve the Initial Position
Another advantage of the averaging up strategy is that it can help improve your initial position, which might not have been very good.
For example, when you previously recorded a buy position that turned out not to be very profitable. Later, this strategy can be used to improve the average purchase price.
This happens because you make purchases gradually when prices are high. Of course, if done consistently, this step will be very effective in covering the shortcomings of your initial position.
- In Line with the Trend-Follow Concept
The averaging up strategy is also in line with the trend-follow concept. In the investment world, this concept is also important to understand and can help you optimize the investment instruments you hold.
Averaging up is a step designed to capitalize on an upward price trend. This is because the investor will make purchases when there is a rise in stock prices within the market trend.
If you can choose stocks with strong fundamentals and apply the averaging up strategy correctly, then this will become a profitable step.
Suitable to Apply or Not?
It is very important to recognize that not every investment strategy can be applied to all investors. Investment steps must be personal and aligned with each person’s risk profile.
So, for the averaging up strategy, who is suitable to apply it? Essentially, this step is more suitable for investors who believe the market trend is bullish or rising.
In addition, this strategy is also more suitable for investors who tend to always conduct in-depth analysis of stock fundamentals. More than that, averaging up is more recommended for aggressive investors.
According to its concept, in this investment strategy the investor will add to purchases when prices rise. So, it is clear that the risk is quite large, which makes this step less suitable for conservative investors.
Safe and Easy Mutual Fund Investment with DBS Treasures
The averaging up strategy can be an option to optimize your investment. However, make sure that you have conducted careful analysis. To simplify your investment steps, choose DBS Treasures priority banking as a trusted partner.
DBS Treasures priority banking will give you convenience in taking investment steps and meeting financial targets. Your investment capital will then be managed by professional and experienced Investment Managers.
You can also enjoy various conveniences when investing in Mutual Funds with DBS Treasures priority banking. Here, it will be easier for you to obtain insights to guide your investment strategy. Diversification strategies also become easier to implement, so investment risk becomes minimal.
There is also the DBS digibank Application, which has many features and simplifies your investing activities. This app helps you register your SID (Single Investor Identification) and carry out buy-sell transactions as well as switching.
You will also be supported by a team of financial experts who communicate curated market analysis and the latest opportunities tailored to your risk profile and portfolio needs, powered by Artificial Intelligence/Machine Learning (AI-ML). These insights are complemented by curated investment (Grow) and insurance (Protect) solutions, so you can invest quickly and confidently through your preferred channel.
Mutual Fund investment can be the right instrument choice for storing your assets for the future. Make DBS Treasures priority banking your partner so that investing becomes easier and safer.
This publication has been curated by the internal team of PT Bank DBS Indonesia (DBSI) and distributed by DBSI.
DBSI is licensed and supervised by the Indonesian Financial Services Authority (OJK). This publication does not constitute, and should not be regarded as, an offer, recommendation, and solicitation for you to purchase or conduct any transaction as described herein. It is also not intended to invite or permit any public offering for the purchase of, or participation in, any transaction in exchange for cash or any other form of benefit, and it should not be interpreted as such.
