Here's a cost-averaging example taken from my own investing experience. I hope this gives readers a better idea of how cost averaging works.
The idea is to make regular investments of equal amounts, regardless of market prices and performance. Thus when prices are low more shares are bought and when prices are high less shares are bought. The average share price will be somewhere in between.
I made my initial investment in June 2010. I invested P5000, buying 2442 shares at a NAVPS of P2.0477.
My next investment was in July 2010. I invested P1000, buying 485 shares at a NAVPS of 2.0632.
My next investment was in August 2010. I invested P1000, buying 468 shares at a NAVPS of 2.1355.
My next investment was in September 2010. I invested P1000, buying 385 shares at a NAVPS of 2.5367. (I chose the front-end load option this month, so the net amount invested was P977.60)
I wasn't able to make my scheduled investment for October 2010 si I invested P2000 in November 2010. I bought 754 shares at a NAVPS of P2.5937. (I chose the front-end load option this month, so the net amount invested was P1955.20)
I missed my December 2010 investment so I again invested P2000 in January 2011. I bought 814 shares at a NAVPS of 2.4557.
I've invested a net amount of P11932.80 so far, buying 5348 shares. The average NAVPS is P2.231264.
P2.231624 is higher than P2.0477, the price at which I made my initial P5000 investment, but it is lower than the P2.4497 NAVPS as of yesterday.