UITF Practice Exam 2025 – Complete Prep Guide

The investment principle of Cost Averaging in a UITF refers to the strategy of dividing the fund into smaller amounts and investing regularly over time. This approach allows an investor to purchase more shares when prices are low and fewer shares when prices are high, which can lead to a lower average cost per share. By consistently investing fixed amounts at regular intervals, the investor mitigates the impact of market volatility and reduces the risk associated with trying to time the market.

This technique can be especially beneficial in fluctuating market conditions because it helps manage emotions and promotes disciplined saving and investing habits. The resulting effect often leads to better long-term returns compared to investing a lump sum at one point in time, especially if that timing is not favorable. This method emphasizes the importance of a consistent investment strategy for building wealth over time, rather than attempting to make predictions about market movements.