By saving regularly, small sums will add up to a large nest egg with time. If you save while repaying your housing loan, you will end up with a reserve fund once you have paid off your loan.
- brings security to your finances
- does not require big income or initial capital
- is suitable for those who want to accumulate a reserve fund.
Usually the best way is to put away a certain amount on paydays: when you do not see the money, you will not miss it, either.
Regular saving mitigates the effect of market volatility
Since market movements are impossible to forecast, it is difficult to time your investments at the best possible moment.
When you invest in several increments instead of everything in one go, you can avoid the risk related to timing.
By investing regularly, you can reduce the effect of market fluctuations over the long term, so you won't need to fret about market movements.
Time diversification benefits investment in funds
The biggest benefit from time diversification can be gained by investing in assets with a highly fluctuating value. Such assets include equities, for example.
When you buy units in equity funds or balanced funds on a regular basis, some of your units will inevitably be bought at a time when their price is high, but the regularity of your investments will ensure that some are bought at the lowest prices.
- Over the long term, you will always buy the fund units at the market price and benefit from any positive developments in the market.
- And you should continue your regular saving when the market experiences a dip.
- Every dip is an opportunity because the same monthly sum will buy you more fund units.
A fund savings agreement is convenient
An easy way of investing in funds over a long period of time is through a fund savings agreement.
With such an agreement, you invest a fixed sum in a fund of your choice on a predetermined date every month or every three months, for example.