Quinn Life Freeway Funds

Hi,
This may sound like a silly question but here goes anyway.

I have been drip feeding a monthly premium into Quinn Life freeway funds since April 2007.
Current split is Euro Freeway (80%), Celtic Freeway (5% - because I also have an ISEQ ETF), China Freeway (5%), Emerging Markets Freeway (5%), Latin America Freeway (5%).

Total Contributions so far: 13,380
Total Value: 8,410 (yikes but in for long haul anyway)
Current Monthly premium is 840.

My question is ..........
If I reduce my monthly premium to 600, will I be consolidating my losses to a certain extent.
I know the concept of 'Dollar Cost Averaging', I know one of the principles is to invest the same amount consistently at regular intervals to insulate against risk. But will reducing by 240 per month make much difference and could I regret it, IF (and I stress the word IF, the market begins to recover). As I said I'm in for the long haul anyway.

WGT said:

But will reducing by 240 per month make much difference and could I regret it

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Why don’t you work it out on a spreadsheet? You have to be reasonably good with figures to be good at investing. Say you have 8,410 invested at present and from now on will invest 840 per month (i.e. an average of ? per year) for the next X years. Then increase your investment each year by say the ECB target rate of inflation to cover inflation, and assume an average stock market gain of say 8% per annum. Then play around with the spreadsheet to see the effect of lowering your monthly investment to 600; vary the duration of your investment; vary the rate of inflation / the average return etc. Then decide.

Any success in gaining a return with the 'Dollar Cost Averaging' investment principle demands you to buy units at a lower price than the exit price you will sell them at in the future. Better returns mean buying units at low prices. Hold your nerve and continue while the prices are very appealing.

One possible strategy to support your reduction in premium to freeway funds throughout the year and minimise consolidating a loss could be as follows:
· You will need a lump sum & a lot of bottle
· Split your drip feeding into your Freeway funds & a Regular Saver Account 7-8% maybe 50:50 for 12months
· Buy the balance of future unpurchased units (840*12*50%) today, the immediate ‘total average unit price paid’ for the fund will be more attractive to support the ’Dollar Cost Averaging' investment principle. [Note: That isn’t to say your 12 sacrificed premium instalments @€420 could be better during the year]
· In 12 months time your cash will be restored by way of regular saving a/c
You may have sacrificed a 3% interest return approx, (6% fixed term Vs. 8% reg. saver) but you will have got units at a good price relative to past purchases.

Any opinions on this strategy?

N/SIDEPEOPLE said:

Any opinions on this strategy?

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This is a standard hedge fund strategy, but it’s designed to work with leveraged products. In the scenario you are describing, if the market declines, you are protecting your downside to the 50% of your cash in the savings a/c plus whatever interest earned plus whatever is the residual value of your fund. If the market increases you don’t do as well as if you had invested all your cash in the fund. [But if you had put half your cash into a 2X leveraged fund you would get back the same gain as if you had invested all your cash in a non-leveraged fund, plus the 50% in the savings a/c plus interest, and your downside is still protected as described above.]