Unit Trust Regular Saving Plan (RSP)

Unit Trust Regular Saving Plan can Help You on Your Investment Journey

Today, whether you are planning for retirement, saving for your children, or achieving any financial goals, you need a sound investment plan and the right product to see you right through. In this scheme, the high potential returns, reasonable risk and cost effectiveness of Unit Trusts with a risk management tool. It is known as the Regular Savings Plan or RSP for short.

Regular Savings Plan is an investment plan that can help you meet financial goals that you have in mind. It takes advantage of the dollar cost averaging concept that does not require you to worry about market timing and volatility.

The Regular Savings Plan aims to turn market fluctuations to your benefit by managing market risk with dollar cost averaging.

This is achieved by investing a smaller fixed amount regularly, regardless of the timing or the individual cost of investments.

Benefits

 

What is dollar-cost-averaging?

Dollar cost averaging is a well-proven and recognized tool in risk management, which advocates the exact opposite of dangerous market timing. Your fixed amount of money will buy more units when prices are low and less when prices are high. If you invest often and long enough, it will help you to average out the market’s peaks and troughs.

Instead of investing one lump sum of your money, you gradually build your portfolio by investing a small amount regularly over a period of time.

Looking at the table below, if an investor was to have invested RM100 monthly over a 12-month period in a volatile market with dollar cost averaging.

 Period RM amount invested Price  Units
 Month 1 MYR100  1.1000 90.91
 Month 2 MYR100 1.0700 93.46
 Month 3 MYR100 1.0500 95.24
 Month 4 MYR100 1.0000 100.00
 Month 5 MYR100 1.0300 97.09
 Month 6 MYR100 1.0100 99.01
 Month 7 MYR100 1.0800 92.59
 Month 8 MYR100 1.0400 96.15
 Month 9 MYR100 1.1000 90.91
 Month 10 MYR100 1.1200 89.29
 Month 11 MYR100 1.0700 93.46
 Month 12 MYR100 1.0800 92.59
 Total  MYR1,200 - 1,130.69

 

Option A : RSP Investment Strategy

Total Investment = MYR 1200
Total Units = 1130.69
Average Price = MYR 1200/1130.69
                    = 1.0613
Option B : Lump Sum Investment

Total Investment = MYR 1200
Unit Price = 1.1000
Total Units = 1090.91

The illustrative example is meant for illustrative purposes only and should not be relied upon as advice.

From the above illustration, an investor would have benefitted from the price volatility and obtained more units at a lower average price as compared to a one time lump sum investment at a potentially higher price.

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