Dollar-cost averaging, fiscal cliff rundown and american taxes

I've heard about the dollar-cost averaging (DCA) method. I want to try to invest this way, but I don't really get the idea of how it works. Could you please explain?

- Panida

ANSWER BY... Teera Phutrakul, CFP, Chairman, TFPA When you use DCA, you buy a fixed amount of a particular investment on a regular schedule regardless of the share or unit price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.

DCA lessens the risk of investing a large amount in a single investment at the wrong time. For example, you decide to purchase 100 baht of XYZ each month for three months. In January, XYZ is worth 33 baht, so you buy three shares. In February, XYZ is worth 25 baht, so you buy four shares this time. Then in March, XYZ is worth 20 baht, so you buy five shares. In total, you purchased 12 shares for an average price of 25 baht each.

What does the US fiscal cliff deal mean for taxpayers? My husband is American and earns income from a small business in Rayong. We've also read about the new US tax law that seems to target expats earning income outside the country. How does that affect us?

- Thida

ANSWER BY... Teera Phutrakul, CFP, Chairman, TFPA Whether your husband works in Rayong or Rhode Island, being a US citizen it's impossible to get away from the long arm of the US Internal Revenue Service. After weeks of wrangling and brinkmanship, the US Congress finally passed a deal to avoid the dreaded fiscal cliff, striking compromises on numerous outstanding tax questions, from what rates the wealthy will pay on income to who will face the alternative minimum tax.

While big questions on how to address spending cuts and the debt ceiling remain unresolved, I am deeply worried about the whole situation, because politicians the world over always like to take the easy option by kicking the can down the road, hoping the next generation can pick up the tab. Since I am not an expert in this field, I can only give you a quick rundown on the basic tax details. You need to consult a tax lawyer for proper advice.

Income tax brackets

Single taxpayers earning less than US$400,000, married couples making less than $450,000 and heads of households making less than $425,000 will pay the same income tax as they did last year. But taxpayers earning more than those amounts in each filing category will face an income tax rate of 39.6% in 2013, up from last year's rate of 35%.

Alternative Minimum Tax

The AMT is a kind of parallel or "shadow" tax code that was set up to prevent a small number of wealthy earners from using tax deductions to shield a disproportionately high amount of their income from taxes. Under the new deal, 2012 income of up to $50,600 will be exempt from the AMT, a threshold that will be tagged to inflation going forward.

Capital gains and dividends

Taxes on capital gains and dividends for most investors will remain the same. But for individuals earning more than $400,000, rates on both dividends and capital gains jump to 20% from 15%.

Payroll taxes

The payroll tax holiday ended in 2012. Employees will thus contribute a larger share of their paycheck to Social Security in 2013. The temporary lower rate will rise from 4.2% to 6.2%, the level it stood at before the holiday was enacted.

Estate tax

In 2012, estates of up to $5 million per person were exempt from federal estate tax. Amounts above that threshold were taxed at 35%. The congressional deal affirms that threshold while also indexing it to inflation. However, it raises the top tax rate to 40% from 35%.

The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted to them through or posted on the TFPA's webboard at

About the author

Writer: Thai Financial Planners Association