Peso Cost Averaging (PCA): What Is It And How Does It Work?

Is Peso Cost Averaging a good investment strategy?

With the market's volatility, no one can know for sure when is the right moment to buy or sell. There is, however, a time-tested approach that can take the guesswork out of market timing, called Peso Cost Averaging.​
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What is a Peso-Cost Averaging or PCA?

Peso-Cost Averaging is an investment technique or strategy where you regularly buy investments regardless of its current price and market condition. Putting a set amount of money regularly into an investment such as stock or mutual fund. More shares are purchased when prices are low, and fewer share are purchased when prices are high. The cost of share over time eventually averages out.

Pros

• Build wealth slowly over time with small amounts.
  
• Helps maintain consistency in investing.
• Reduces investment risk.
• Protects when market timing backfires.
• Helps build strong portfolio.
• Enables disciplined savings.
  

Cons

• ​It won't make you a lot of money quickly.

How does it work?

For example you have an extra money worth Php 200,000 and want to invest it. You can split it into equal portions and invest every month regardless of the price.

Remember: More units are bought when the prices are low. Fewer units are bought when the prices are high.

But why not just invest everything in one go?

Are prices high or are prices low? Nobody really seems to know. If you keep on waiting for prices to fall, you may end up not investing at all!

Again, things to remember when doing PCA:
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• Split your money into parts.
• Don't time the market.
• Get into the habit of investing on a regular basis.