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.
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.