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Regular savings

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There's never any shortage of bills to pay. However, if you treat regular savings as a necessity rather than an option, you'll be less tempted to spend money on other things.

Two main advantages of a regular savings plan are:

• You can take advantage of dollar cost averaging
• You can grow your investments faster

Dollar cost averaging
With dollar cost averaging, you simply invest a set amount of money on a regular basis over a long period of time. The idea is that by investing regularly over the long term you should automatically buy less when the market is up and more when the market is down.

Look at the example in the table below.

Say you put $100 per month into a managed fund that initially had a unit price of $10. Over the next few months, the market falls (causing the unit price to drop) before recovering to its original value. At the end of the five months you have 65 units each worth $10, so you have $650. You have invested $500, so your profit is $150 even though the unit price is the same as when you first invested.

Dollar cost averaging doesn't guarantee a profit but it can help smooth out the market's ups and downs.

Month	Investment	Unit price	Units purchased
1	$100	$10	10
2	$100	$8	12.5
3	$100	$5	20
4	$100	$8	12.5
5	$100	$10	10
Total	$500		65

This table is for educational purposes only. It is not represntative of any particular investment product or investment strategy. No allowance has been made for inflation, fees or expenses.

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Grow your investments faster
The chart below shows the results of starting with an initial investment of $1,000 then $200 per month for the next 10 years, based on an investment return of 8% pa and inflation of 2.5% pa. Total contributions will be $27,888 and at the end of 10 years, the investment will be worth $42,825 and the total portfolio equates to $70,713.


Assumptions: Tax and fees are not taken into consideration, investment returns consist of income and growth and are claculated monthly. This illustration is not representative of any investment product.

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