Financial Planning

Unsurprisingly, the purpose of an emergency fund is to help you deal with unexpected things that come up in life. Let’s face it; no one knows what is going to happen tomorrow. And if something unfortunate should happen, it is probably going to require money.

One commonly misunderstood financial principal is the importance of deferred taxation. Some people figure that since taxation is inevitable there is no point worrying about whether you pay the taxes now or later.

Mathematically speaking, this is far from true. The more assets you have available to compound, the greater your total returns. Taxation erodes your asset base leaving you less money available for growth.

A common question that comes up among investors is whether it is better to save up large sums of cash and then invest it all at once, or invest small amounts regularly. Dollar Cost Averaging (DCA) refers to the practice of investing a fixed amount at defined intervals (often monthly) into a fund or portfolio of funds. By investing this way more units are purchased as prices drop and fewer units are purchased as prices rise. Investors use DCA to guard against the market dropping shortly after investing a lump sum.