2.3 Methods of Investing and Dollar Cost Averaging

FIMM Combined Examination FCE

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1 Introduction: The FIMM Combined Examination (FCE)

0.1 FCE Exam Facts, Registration Rules and How to Use This Guide

2 Chapter 1: Understanding Collective Investment Schemes in Malaysia

1.1 What a Collective Investment Scheme Is and How Malaysian CIS Are Classified 1.2 Investment-Linked Funds Are Not UTS; Industry Growth and History 1.3 Participants in the CIS Ecosystem: Unit Holders, Managers, Trustees, Distributors and Regulators

3 Chapter 2: Introduction to UTS and PRS

2.1 UTS and PRS as Investments: Mechanics, Unit Calculations and How They Compare 2.2 Types of Funds: By Asset Class, Fund Structure and Investment Objective 2.3 Methods of Investing and Dollar Cost Averaging 2.4 Benefits and Disadvantages of Investing in UTS and PRS 2.5 Understanding Risk and the Risks of Investing in Schemes 2.6 Shariah-Compliant Schemes, Their Risks and the Role of the Shariah Advisory Council

4 Chapter 3: Regulatory Framework

3.1 The Regulatory Framework: The SC, Other Regulators and FIMM's Dual Role 3.2 Legislation, SC Guidelines and FIMM Rules Governing UTS and PRS 3.3 Regulation of Scheme Providers and Oversight Functions 3.4 The Deed, the Prospectus or Disclosure Document, and the Product Highlights Sheet 3.5 Portfolio Constraints: Permitted Investments, Liquidity, Borrowing and Exposure Limits 3.6 Regulations for Other CIS: Real Estate Investment Trusts and Exchange-Traded Funds 3.7 Regulation and Duties of the Scheme Trustee 3.8 Regulation of Marketing and Distribution: Distributor Categories, Collection Points and Agency Structure 3.9 Registration of Consultants: Eligibility, Fit and Proper, Duration, Variation and Revocation

5 Chapter 4 (Part 1): Marketing and Distribution — Disclosure and Transactions

4.1 Servicing Investors and the Contents of the Prospectus and Disclosure Document 4.2 The Product Highlights Sheet, Advertising Standards and Account Maintenance 4.3 The Purchase Process and Suitability Assessment Before Personal Advice 4.4 Cooling-Off Rights, Repurchase of Units, Suspension and Switching 4.5 Financing the Purchase of UTS: Process, Safeguards and the Risk Disclosure Statement 4.6 EPF Transfers and Withdrawals for Investment in Approved Unit Trust Funds

6 Chapter 4 (Part 2): Marketing and Distribution — Distributions, Reporting and Service

4.7 Distributable Income, Distributions and NAV, "Buying" a Distribution and Taxation 4.8 Reporting to Investors: Confirmations, Statements, and Semi-Annual and Annual Reports 4.9 Marketing Principles, Delivering Quality Service and Handling Complaints 4.10 The Effect of Inflation, Taxation and Investment Costs on Returns 4.11 Investment Alternatives to UTS and PRS

7 Chapter 5: Code of Ethics

5.1 Compliance, Ethics and the Structure of the FIMM Code of Ethics 5.2 Core Principle 1: Honesty and Integrity 5.3 Core Principle 2: Professionalism 5.4 Core Principles 3 to 5 and Non-Compliance: Conflicts, Disclosure, Confidentiality and Misconduct

8 Chapter 6: Personal Financial Planning

6.1 Personal Financial Planning: Definition, Features, Five Areas and the Six Steps 6.2 Financial Planner Credentials, Skills, Remuneration, and How a Planner Differs from a Consultant 6.3 The Consultant's Role in Investment Planning and Advising Clients Through the Life Cycle

9 Chapter 7A: Features and Operations of UTS

7A.1 Structure of a UTS, the Trust Deed, the Parties and Modifying the Deed 7A.2 UTS Fees, Charges and Expenses, and the Management Expense Ratio 7A.3 Dealing in Units, Valuation, NAV Calculation and Unit Prices 7A.4 Forward and Historical Pricing, and the UTMC's Holding of Units 7A.5 Unit Splits, Distributions and Their Effect on NAV 7A.6 Measuring UTS Performance: Returns, Performance Tables, Risk Measures and Qualitative Factors 7A.7 Operational Aspects of Shariah-Compliant UTS and PRS and the Shariah Contracts Between the Parties 7A.8 Borrowing to Invest in UTS and the Risks of Loan Financing

10 Chapter 7B (Part 1): The Pension Landscape and the PRS Framework

7B.1 The Malaysian Pension Landscape and the Adequacy of Retirement Savings 7B.2 The World Bank's Five-Pillar Pension Framework in the Malaysian Context 7B.3 Key Players: EPF, KWAP, LTAT, Employer-Sponsored Schemes and Annuities 7B.4 Why Malaysia Needs PRS: Ageing, Longevity Risk and the Benefits of PRS 7B.5 The PRS Framework and the Private Pension Administrator (PPA) 7B.6 PRS Structure, the Trust and Deed, Advantages over Other Products, Eligibility and Contributions

11 Chapter 7B (Part 2): PRS Operations

7B.7 The PRS Default Option and Tax Incentives for Members and Employers 7B.8 The PRS Account Structure (Sub-Accounts A and B) and Vesting 7B.9 PRS Withdrawals: Pre-Retirement, Retirement, Permanent Departure, Incapacity and Death 7B.10 Switching Between Funds and Transferring Between PRS Providers (Portability) 7B.11 Unclaimed Monies, Death of a Member and PRS Nomination 7B.12 PRS Funds: Number, Core and Non-Core Funds, Objectives, Risk Profiles, Asset Classes, Authorisation and Naming 7B.13 PRS Fees, Charges and Expenses 7B.14 PRS Unit Creation, Forward Pricing, Valuation, Distributions, Performance Measurement and Electronic Communication

2.3 Methods of Investing and Dollar Cost Averaging

Key Takeaways Explain This Topic AI

A lump sum purchase is the most common way savings are invested in a scheme, and it carries no commitment to add further money.

Reinvesting income distributions buys additional units each time a distribution is made, which compounds returns over time.

Regular savings contributions in a scheme are not contractual and can be stopped at any time without penalty.

In the study guide's falling-market example, investing RM6,000 a period gives an average cost of RM4.38 per unit versus RM6.00 when buying a fixed 1,000 units each period.

Dollar cost averaging helps but does not guarantee favourable results, and it works best when used consistently over long periods.

Last updated: October 2026

Three Ways to Invest

Method How it works Typical use

Lump sum purchase Invest a single amount that meets the minimum application amount; no further commitment An inheritance or bonus set aside for education, retirement or a house

Reinvestment of income Distributions are used to buy more units instead of being paid out Turning small distributions, which are often just spent, into more units

Regular savings Contribute regularly (for example monthly), in effect a series of small lump sums Investors with small capital building towards a future need

Lump sum – the study guide calls it the most common method. Over time the unit price is expected to reflect accumulated and compounded returns, but if returns are negative the investor may get back less than invested.

Reinvestment – some Scheme Providers reinvest distributions automatically under a standing instruction; others give extra units through a unit split. Either way the compounding effect is the same.

Regular savings – contributions are not contractual and can be stopped at any time without penalty . This disciplined, flexible approach is the same principle that underlies EPF retirement saving, and it lets people with small capital participate with a low outlay.

Dollar Cost Averaging

Dollar cost averaging means investing a fixed amount of money at regular intervals , whatever the price. Because the amount is fixed:

when prices are low , the money buys more units;

when prices are high , it buys fewer units.

This can bring the average cost per unit below the average price over the period. The rationale is that hardly anyone can consistently invest at the bottom of the market, so most small investors are better off investing regularly through all stages of the cycle.

The study guide compares two investors who each spend RM30,000:

Investor A buys a fixed number of units (1,000) every period, so the amount spent varies.

Investor B invests a fixed ringgit amount (RM6,000) every period, so the number of units varies.

Falling market

Unit price A: units A: cost B: units B: cost
RM10.00 1,000 RM10,000 600 RM6,000
RM8.00 1,000 RM8,000 750 RM6,000
RM6.00 1,000 RM6,000 1,000 RM6,000
RM4.00 1,000 RM4,000 1,500 RM6,000
RM2.00 1,000 RM2,000 3,000 RM6,000
Total 5,000 RM30,000 6,850 RM30,000

Average cost: A = RM30,000 ÷ 5,000 = RM6.00 ; B = RM30,000 ÷ 6,850 = RM4.38 . B holds 1,850 more units, which pays off if prices recover.

Rising market

With the same prices in reverse order (RM2 up to RM10), the totals are identical: A still averages RM6.00 and B RM4.38. B keeps the cost advantage.

Fluctuating market

Unit price A: units A: cost B: units B: cost
RM10.00 1,000 RM10,000 600 RM6,000
RM6.00 1,000 RM6,000 1,000 RM6,000
RM8.00 1,000 RM8,000 750 RM6,000
RM6.00 1,000 RM6,000 1,000 RM6,000
RM2.00 — — 3,000 RM6,000
Total 4,000 RM30,000 6,350 RM30,000

A's budget runs out after four purchases: average RM7.50 . B averages RM30,000 ÷ 6,350 = RM4.72 . The study guide notes that the benefit is even more marked in a fluctuating market.

The Formula to Use in the Exam Average cost per unit = Total amount invested Total units bought \text{Average cost per unit} = \frac{\text{Total amount invested}}{\text{Total units bought}} Average cost per unit = Total units bought Total amount invested

Compare it with the simple average of the prices paid. Example: RM300 invested in each of three months at RM1.00, RM0.75 and RM1.50 buys 300 + 400 + 200 = 900 units for RM900, an average cost of RM1.00 , below the average price of (1.00 + 0.75 + 1.50) ÷ 3 = RM1.0833 .

Caveats

Dollar cost averaging helps but does not guarantee good results. In the falling and fluctuating examples both investors lost money because the final price was below their average cost.

Its real value is the commitment to regular investing : buying more units when fear is greatest, and avoiding the need to time the market.

It should be used over long periods to get the full benefit.

Lump Sum or Regular Savings?

Question Lump sum Regular savings / dollar cost averaging
Money available now? Needs a large amount up front Works from small monthly amounts
Market timing risk High: all money enters at one price Lower: purchases spread across prices
Discipline One decision Builds a saving habit, like EPF contributions
When it shines Prices rise steadily after the purchase Prices fluctuate or fall before recovering

A Consultant should match the method to the client's cash flow and temperament. A client with an inheritance who is nervous about markets might combine a smaller lump sum with a regular monthly top-up, gaining some immediate exposure while averaging the rest.