How paying monthly can help you to enhance your savings!

Making payments into your pension or ISA can deliver added benefits, as stock markets tend to fluctuate over time. By buying units in your plan every month, it can actually be beneficial when markets fall, as the average cost of the units is lower over time compare to investing all of your cash at once.

Consider these two examples which compares investing in a steadily rising market with one that fluctuates.

1. Unit prices rise at a constant rate from £1 to £1.40 over time

Year Investment Unit Price Number of units purchased
1 £3,000 £1.00 3,000
2 £3,000 £1.10 2,727
3 £3,000 £1.20 2,500
4 £3,000 £1.30 2,307
5 £3,000 £1.40 2,143

Total Units purchased 12,677

Value at year 5: 12,677 * £1.40 = £17,747.80

2. Unit prices fluctuating up and down over same period

Year Investment Unit Price Number of units purchased
1 £3,000 £1.00 3,000
2 £3,000 £0.88 3,409
3 £3,000 £1.08 2,777
4 £3,000 £0.96 3,125
5 £3,000 £1.40 2,143

Total Units purchased 14,454

Value at year 5: 14,454 * £1.40 = £20,235.60

This is of course a theoretical example but it clearly demonstrates that fluctuating prices need not damage the overall return and may well enhance your ISA savings or pension pot.

Contact one of the team today to help boost saving for that new car, house, wedding or retirement home in the sun!

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