Creating a regular savings plan that works for you
Who should consider investing via regular savings plans (RSP)?
"Should I make a regular savings plan? And why?" Maybe you have such thoughts.
Although a regular savings plan (RSP) is an easy way for many people to invest in mutual funds, it doesn't mean it is suitable for everyone.
Generally speaking, RSP may be a good choice for but is not limited to the following groups of people:
Investors with long-term goals such as saving up for pension and children's education;
Investors who want to mitigate investment risks;
Investors who have limited time for wealth management;
Inexperienced investors who want to invest with disciplines.
Three things you need to know about RSP
When setting up your RSP, you should decide three things:
Choosing appropriate funds.
Investment amount each time.
Frequency: daily, weekly, every two weeks, or monthly.
Let's talk about them respectively.
1. Choosing appropriate funds
Direction is more important than speed. Not all funds are suitable for RSP.
As we say in 'What is a Regular Savings Plan?', RSP has many advantages, including playing critical roles in two aspects:
– Utilizing volatility
– Taking advantage of the power of compound interest in the long term.
Generally, equity funds and blend funds tend to be better choices due to their relatively greater volatility. A regular savings plan is usually part of a dollar-cost averaging strategy, which often lowers investment costs in the long term. Your money will buy less when the market is up, but you'll also lock in lower-priced investments when the market is down.
However, volatility shouldn't be the only thing to look at. A fund with the highest volatility is not always the best option. You must consider the product's risk level, investment objective, and investment period.
Considering the long investment time, you should choose reliable asset management companies and agree with the strategies of fund managers. If not, you may lack the confidence and patience to invest long-term.
2. How much should you invest each time?
The investment amount depends on you. Here are some suggestions for reference.
3. Daily, weekly, every two weeks, or monthly – What should be the frequency of RSP?
You can choose a variety of frequencies of RSP.
According to some analyses, frequency has a little marginal impact on returns. You can make your own decisions at your convenience.
Investing monthly is a popular mode for many people receiving a fixed salary each month. Oftentimes, RSP days can be the next day of their salary date. But if you want to follow the financial market closely, you could also invest daily, weekly, or every two weeks.
Please note that a regular savings plan does not ensure a profit and does not protect against loss in declining markets. It involves continuous investing regardless of fluctuating price levels. Investors should consider their ability to continue investing through periods of fluctuating market conditions.
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more