Value averaging is a variation on dollar-cost averaging (DCA). Instead of investing the same amount every month, you set a target for what your holding should be worth, say S$500 more each month, and top up by whatever it takes to reach it. You put in more after prices fall and less, or even sell, after they rise. Other variations include reinvesting dividends automatically, investing a fixed share of your pay, and rules that add extra after a fall.
These are methods for deciding how much to invest and when. None of them changes the risk of what you buy, and none guarantees a profit. This article explains them neutrally with our own illustrations.
Plain DCA, as a Baseline
With dollar-cost averaging you invest a fixed sum, for example $500, on the same day every month. In our standard 12-month illustration, prices fall from $1.00 to $0.75 and recover to $1.05. DCA puts in $6,000, ends with about 6,733 units worth about $7,070, and has an average cost of about $0.891.
How Value Averaging Works
You set a target value path: $500 after month 1, $1,000 after month 2, $1,500 after month 3, and so on. Each month you check what your holding is worth at today’s price and invest the difference.
- If prices fell, your holding is worth less than the target, so you invest more than $500.
- If prices rose, it is worth more, so you invest less. In a strong rise the formula can tell you to sell.
Worked example: the same 12 months
Illustration only, not a guarantee. Same made-up prices, target rising by $500 a month, no fees.
| Month | Price | Value averaging puts in | Plain DCA puts in |
|---|---|---|---|
| 1 | $1.00 | $500 | $500 |
| 3 | $0.90 | $553 | $500 |
| 6 | $0.75 | $656 | $500 |
| 7 | $0.80 | $300 | $500 |
| 9 | $0.90 | $265 | $500 |
| 12 | $1.05 | $225 | $500 |
| Total | About $4,993 | $6,000 |
At the end, value averaging holds about 5,714 units worth $6,000 (its target) for about $4,993 put in, an average cost of about $0.874. Plain DCA put in more and ended with more in dollars, about $7,070.
As a percentage gain on money invested, value averaging did a little better on this path: about 20% against about 18%. It did that by putting in more when prices were low and holding back when they recovered.
The catch: the cash swings
Make the fall deeper. If prices drop 40% by month 6 before partly recovering, value averaging asks for about $794 in month 6, nearly 60% more than the usual $500. Over several years of falling prices, the amounts required can grow much larger, exactly when markets feel worst and jobs may be less secure.
So value averaging needs:
- spare cash on hand that you are prepared to invest in a falling market;
- a place for the money it tells you not to invest in good months;
- more decisions and more trades, each with a fee.
Most Singapore regular savings plans buy a fixed amount, so value averaging usually means changing your plan amount by hand each month or adding one-off purchases.
The short version: value averaging tops up to a rising target, so it invests more after falls and less after rises. It can lower your average cost compared with plain DCA, but it needs a cash buffer that can swing widely and the discipline to follow the formula when markets fall.
Reinvesting Dividends (DRIP)
A dividend reinvestment plan (DRIP) uses the dividends a holding pays to buy more of it. That is compounding in action: the new units earn dividends of their own. Our compound interest explainer shows how that adds up.
How Singapore plans handle dividends differs. As at November 2026, from each provider’s own page:
- Phillip Securities’ Share Builders Plan adds cash dividends to the money it reinvests in your chosen counter the next month, after a dividend charge of 1% (minimum S$1, capped at S$50).
- OCBC’s Blue Chip Investment Plan credits cash dividends to your debiting account; share dividends go to your plan account. To reinvest cash dividends, you add them back yourself.
Some funds reinvest inside the fund (accumulating share classes), which our ETF investing guide covers.
On tax, IRAS says one-tier dividends from Singapore resident companies and foreign dividends received by resident individuals are generally not taxable, with some exceptions. Overseas withholding tax on foreign holdings is separate. For how dividends themselves work, see dividend stocks explained.
Other Variations
| Method | How it works | Watch out for |
|---|---|---|
| Percentage of pay | Invest a set share of each month’s income. The MAS and MoneySense Basic Financial Planning Guide suggests investing at least 10% of income. | The amount moves with your pay, including bonuses and cuts. |
| Step-up DCA | Raise the monthly amount each year, for example with a pay rise. | Make sure the emergency fund keeps pace. |
| Extra-on-falls rule | Keep the regular amount, and add a set extra sum if prices fall by a set percentage. | Needs a cash reserve and a rule written down in advance. |
| Fixed-units buying | Buy the same number of units each month. | You spend more when prices are high, the opposite of DCA’s effect. |
| Lump sum plus DCA | Invest part of a windfall now and phase in the rest. | A middle path; see DCA vs lump sum. |
Every one of these is a rule for timing contributions. MoneySense’s point about removing emotion from investing applies to all of them: the rule only helps if you write it down and follow it.
What To Do Next
- Decide whether your cash flow can handle a variable monthly amount before choosing value averaging.
- Check how your plan treats dividends, and whether reinvestment carries a fee.
- Model different price paths and fees in the DCA vs lump sum calculator.
- Do your own due diligence: read the plan’s terms, and check the provider in the MAS Financial Institutions Directory.
