What Is The Benefit Of “Pound Cost Averaging”?

Many of you will no doubt be aware of the term “pound cost averaging” when it comes to savings and investments. However, for those that are not familiar with the term a brief explanation would be appropriate as it can form an important part of someone’s investment strategy.
 
“Pound cost averaging” tends to be focused on saving money on a regular basis but can be used when it comes to investing a lump sum but we will look at that a little later.
 
Firstly, let’s look at an example to show exactly how “pound cost averaging” may work to your financial advantage. When you save in unit trusts you buy units in a particular fund or funds so let us assume that you set up a unit trust savings plan to save £100 per month and the price of each unit is £1 on the day you make your first deposit.
 
You do not need a calculator to work out that your £100 will buy you 100 units so your fund is worth £100 ignoring any charges. However, by the time your next £100 goes in next month the unit price has dropped to 50 pence. So your second £100 will buy you 200 units. The value of your unit trust is now worth £150 that is calculated based upon 300 units of 50 pence each. When your third month’s £100 is used to buy units the price of the units has gone back to £1 so you now have 400 units with a value of £400 yet you have only saved £300 – not a bad return!
 
The above example may seem a bit extreme as far as the fluctuating price of the units is concerned but is merely used to demonstrate what “pound cost averaging” is.
 
So, as you can see, the benefit of pound cost averaging is that it spreads your risk when saving on a regular basis. It “averages” out the ups and downs of fluctuations in the performance of the stock market going some way towards providing a natural shelter against such changes.
 
What is perhaps not as commonly known is that “pound cost averaging” can also be used when it comes to making a lump sum investment. Let’s assume that you have £5,000 to invest in unit trusts. Most people would invest the whole amount in one go but there is absolutely nothing to stop you spreading that investment over a number of months. For instance, you could deposit say £1,000 every month for a period of five months.
 
However, needless to say, there are no guarantees that the value of your fund over say five years will have a greater value than the amount that has been saved or invested over that period but “pound cost averaging” does perhaps provide the opportunity to spread your risk just that little bit more. Yes, it could work against you dependent upon the price of the units when you make your deposits but that is a chance that you take.
 
Written by
Scott Bryan is a financial blogger who enjoys explaining the arcane world of finance in everyday terms. Formerly a high street bank manager for over thirty years, he knows that everyone has unique requirements and so is dedicated to helping you find the right solution for you. He now works as a freelance financial writer when not consulting for Profile private wealth management software.

Gold Options

The stock exchange market is a wild field were one can make a lot of money. But the first thing that you should know when you come across Commodities, as opposed to stocks, currencies and indices, they derive their value from intrinsic properties rather than associated ones. That’s way the value of a penny or a cent often greatly exceeds the value of the metal from which it is made, whereas the value of gold is directly related to intrinsic characteristics, such as weight and purity. Due to the fundamental value of gold and its limited availability, gold’s minimum value is thought to exist below which a troy ounce of gold should not fall. As such, gold serves as a secure asset which is associated with a value surge when the market suffers from uncertainty.

So what is the real worth? 

The tangible value of gold versus the conceptual fundamental value of other is what might be said to define the movements in its value. A rule of thumb is that the price of metal commodities, gold in particular, is exquisitely sensitive to fluctuations in underlings with associated values. If an important central bank announces a round of quantitative easing, a reduction in interest rates or an increase in money printing, investors might turn to solid commodities to mitigate the risks of inflation or stock devaluation. The economic crash of 2008 was indeed followed by a sharp increase in gold price as investors lost confidence in the market.

Demands in the market- should I invest? 

Gold is a very unbalanced and essential commodity. It has been reported to have had a diverse demand from global markets by the World Gold Council’s first quarterly (Q1) report of 2013. Although a significant increase in the Far East and the Middle East has been reported for gold jewelry, a total demand of gold has gone down 19% in comparison with the 4th quarter of 2012. Some have suggested that this trend implies an increase in consumption coupled with a decrease in investors’ anxieties, and an overall cautious vote of confidence in the recuperation of the world’s economy. Following this logic, gold proves itself as a bet-hedging strategic investment at uncertain times that can reclaim its value, even at a relative loss, when markets recover- much like an insurance policy.

Things to be aware of 

When considering trading binary options with gold as an underlying, it is important to be attuned to the level of uncertainty that exists in the market. As a non productive, though volatile underlying, gold options could be generally thought of as prone to sharp increases in value and rather soft following decreases. However, when trading in binary options over very short periods of time, and considering the volatility of gold (which is known to fluctuate by 30%), this proposed trend might not hold true, especially when obvious entry points, such as imminent inflation or austerity plans are announced, do not present themselves. As such, considering price fluctuations and the psychology of gold acquisitions, investing in gold, binary options holds a certain risk but also a significant potential benefit to the shrewd investor.

How To Save Money On Household Expenses

There are actually a lot of ways to save money on household expenses. The question is whether we are persistent in following them or give up midways just because we want freedom. From my personal experience, I do know that fiscal freedom can only be gained when you have enough of liquid funds. In this blog, I will show you some good money-saving tips on household expenses. You can add more to this list, however, make sure to commit yourself to following them with patience and persistence.

Save on Electricity

  • Switch off your air conditioner if the house is empty: If you are away for several hours, switch off the air con instead of letting it run full blast. Adopting other power-saving measures like turning off AC in the morning and at night will also show a magical impact on your electric bill. Adjust the thermostat manually by 5-8 degrees, it will also add to your saving on monthly power bill. 
  • Clean the filter or replace it: Check your AC filter regularly. Dust builds on them quickly, thereby prohibiting adequate amount of air from passing through and cooling the room. It won’t take much time to clean the filter and you can do so on your own. However, problem is people often forget to do that. If the filter is clean, your air con will run at the peak of its capacity which will reduce the electric bill too. If the filter has gone bad, replace it as immediately as possible. 
  • Install a programmable thermostat: By installing a programmable thermostat, you can make sure to add more to saving on household expenditure. Regulate the temperature as required instead of letting it run at same level. Whenever you will be sleeping or going out, adjust the set-back temperature automatically. 
  • Use solar panels: There are unlimited options to save electricity. Think about using alternative energy like sunlight. You will get abundance of it and don’t have to pay a price for the same. The hitch is that solar panel is expensive, however, you will get dividends for a long span of time, may be throughout lifetime. 

Save on Fuel Charge

  • Use pressure cooker: Everyone knows that boiling is done fast in pressure cooker. Alternatively, you can cover your pan with a lid.
  • Buy a solar cooker: It is a much advertised way to save your fuel charge. It will save your time for cooking. You can cook multiple dishes at a time. Don’t worry, taste will be wonderful. You can also use induction or microwave system of cooking; it will add a little to your power bill but save a lot on your fuel charge. 

Save on unnecessary expenses

You may need to take a hard look at your ‘miscellaneous’ expenses. The shorter the list, better will it be for you. Don’t buy anything just because it appeals to you. Be focused on ‘utility’ factor. Try to mange with inexpensive things, especially at the end of the month when you are tight on your budget.

Top 5 Financial Mistakes Young People Make

Living is not easy for young people who have just started their independent course of life. They want to get everything at the same time but can get nothing without making an effort. Moreover youngsters make first steps in building their future. It would be easier to achieve success if they would not make some financial mistakes which can importantly impact their monetary life. Learn more about mistakes you should avoid and learn how to do it.

Poor Budgeting

There is a lot of information about planning a budget but many of 20 something find budgeting boring or just don`t know how to manage their money. Taking control over your finances is the first step to successful money saving, efficient spending and financially secured life. Create a budgeting plan and try to spend money only on really necessary things.

Not Having Savings for a Rainy Day

To feel financially secured it’s necessary to save money and put it into your emergency fund. A person who has some money savings feels more confident about his/her future. If you don’t have any saving then every small financial problem makes you very vulnerable so you need to borrow money or apply for faxless payday loans Canada. If you have savings for a rainy day then you feel financially independent.

Overspending

Most young people are influenced by advertising and coevals so they want to get all the newest gadgets and fancy clothes. Usually they don`t really need all these things buy them because it’s fashionable. If young people will get into consideration how much money they pay to buy all that, they will realize that in future they will have to work really hard to afford such luxuries. It’s necessary to distinguish your wants from your needs and try to live within your means. If you want to buy something then be patient, save money and consider all the pros and cons of a purchase.

Irrational Credit Card Use

Needless to say that today credit cards are extremely popular. If you have no money you can just pay with card and get what you want. For young people it is a big temptation to overspend. That’s why it’s necessary to control credit card usage and always make payments on time to avoid paying interest and fees. Keep in mind that you need to build a good credit history and that’s why it’s worth to be careful with lending products.

Not Saving for Retirement

When you are young you think that you have a lot of time to save for retirement and it’s not necessary to start doing it today. But time runs very quickly. It’s much better to start saving when you are young and full of energy. Then you will be able to save more money and to provide yourself a good life in golden age.

Saving Tips for Frugal Students

With the cost of living skyrocketing while the loan rate goes nowhere, it’s getting even harder to make that student loan stretch. Here are some money saving tips to help you make the most of your pennies.

Food

Firstly, avoid takeaways. Even the cheapest takeaway is going to cost more than the ingredients needed for a decent but simple home cooked meal. What’s more, that takeaway is cheap for a reason and its cost will be represented in its nutritional value. A great student staple is a simple bolognaise. You can buy minced beef for as little as £1.75, then all you need to do is add a little onion and garlic, some dried herbs, maybe some mushrooms, courgette and peppers and a cheap tin of tomatoes. Or buy your ingredients in bulk, cooking up a vat of bolognaise which you can divide up and freeze for future meals. Much cheaper than any takeaway and healthier too.

Clothes

High street fashion is the fashionista student’s best friend. Of course, it’s never a good idea to splurge every penny of your loan on a new wardrobe, but how else how are you going to afford to make sure you keep up with the latest trends? Luckily, it’s quite easy to look good for less, so long as you have a good eye for bargains and an imagination.

New Look is a great place to start. It sells clothing that is at the more affordable end of the price range, which is nonetheless stylish and fully up to date with current fashion trends. You can find all your staples such as skinny jeans and summer dresses here, as well smarter, funky pieces, such as pink blazers for much less than competitors like Top Shop.

If you’re not averse to rootling around for bargains, try trawling through second hand shops, charity shops and flea markets. The retro and vintage looks are very much still in and if you look hard enough you’re bound to find some gems.

Transport

Travel has a tendency to eat into your budget, especially in the big cities. If you need to make a bus or tube journey into university every day, then a pass will work out much better price-wise than paying the individual fares. You’ll also get a student discount, which will knock even more off.

For the health conscious, why not invest in a bike? It’ll cost a little up front to buy, but it’s a great long term investment as travel is free. To give you an idea on what you could be saving, a good Raleigh bike will set you back £500, while a student travel card in London will cost around £1,500.

Vouchers

Never go out before checking for vouchers. Vouchers can give you great discounts on food, days out, club nights and everyday shopping. There are plenty of voucher sites on the web, but the best for students is the dedicated student moneysaving site Student Beans