Investors will soon be able to utilize a new dollar-cost averaging (DCA) strategy that would make building long-term investment portfolios easier through placing of odd lot market orders for securities, the Financial Supervisory Commission said yesterday.
The new investment scheme bypasses the local bourses’ requirement of 1,000-share lots for market orders and would allow investors to purchase shares in odd lots, the commission said.
Investors would be able to conduct their transactions via a trust account at their brokerage, which would place market orders on a wealth management platform that operates with the existing securities trading infrastructure, the commission said.
The wealth management platform is designed to bypass the technical hurdles in processing odd lot market orders, the FSC said.
“We expect the new scheme to bring gradual gains to daily turnover by attracting more types of investors, such as young professionals,” Securities and Futures Bureau Director-General Wang Yung-hsin (王詠心) said at a news conference.
The DCA strategy is an investment method where a fixed US dollar amount of a particular investment is purchased on a regular schedule, regardless of current market prices, Wang said.
The strategy would shelter investors from short-term volatility, as the purchasing price is averaged over a longer duration with the goal of reaping long-term gains, as well as opening up new investment options where the cost of purchasing a full 1000-share lot would be prohibitively high, Wang said.
“We hope to see less hasty trading among investors aiming to catch the latest rally or dump their holdings during panics, as buying high and selling low often results in losses,” Wang said.
More than 10 brokerages have voiced their interest in the new service, Wang said, adding that the brokerages would cover the expenses of maintaining an inventory of stocks to satisfy clients’ odd lot orders.
“Brokerages would set the fees for the new service, but we expect them to set it lower than conventional market orders and other offerings that involve advisory services,” Wang said, adding that while brokerages would offer a list of recommendations, investors would have to pick their own stocks.
“The recommended duration for a long-term investment portfolio is at least two to three years,” Wang said.
The strategy would exclude short-term investments such as warrants, and leveraged and inverse exchange-traded funds, she said.
The commission is working with relevant institutions to achieve the required back end system compatibility and legal amendments to launch the new service in about three to six months, it said.
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