The rule of 36

Investment Bites

Posted by TPC on 2021

Too afraid to invest?

While looking for an investment plan, I stumble upon this rule for someone that is a cash hoarder and investment coward. Hey, that's me!

Dollar Cost Averaging 

The idea is to breakdown the case that you have to invest into tiny bits so that timing the market no longer matters. It's like dollar-cost averaging your savings. 

The formula

$ to invest in a month = [ Your monthly savings + current savings/36]

So, for a monthly savings of RM500 and RM18,000 in cash saving, I have to invest RM1000 monthly for the next 3 years. 

I like this because if the average market cycle is 10 years, breaking our savings into 3 years of action is a sure way to reach an average cost in your investment (you either buy up from the bottom or buy down from the peak).