Back

Cost averaging principle

Cost averaging principle applies in the context of the s Fonds Plan (i.e. when regular fixed payments are made to an investment fund). The principle describes the effect of price fluctuations. If the s Fonds Plan is based on a certain fixed amount, more units of a fund are purchased when issue prices are low and fewer units are bought when issue prices are high. In the long term, this leads to a lower average purchase price than the regular purchase of a fixed amount of shares over the same period.