This page has an average rating of %r out of 5 stars based on a total of %t ratings
Created on 18.03.2020

Is it worth opening a funds saving plan at the moment?

A major stock market correction is currently taking place worldwide. That’s nothing new – such corrections have always been part and parcel of business on the stock market. Many investors are now wondering what the current correction means for their investment strategy or assets. For example, is opening a funds saving plan still worthwhile at the moment?

With a funds saving plan, you regularly (e.g. monthly) buy units in a particular fund, thus benefiting from the cost averaging effect. Further information can be found in the articles “The cost averaging effect” and “What is a funds saving plan actually?”.

Holders of funds saving plans or investors who would like to open a new one should not be perturbed by turbulent periods on the stock market. Opening a funds saving plan in a downturn means you actually receive more fund units than when prices are high. When the stock markets recover, this can have a positive impact on your funds saving plan, depending on its composition. The high number of fund units that you received when investing at a low point then starts to increase in value again – a simple benefit that the funds saving plan offers.

The following graphic clearly shows what impact price fluctuations have on your regular payments:

This example explains the cost averaging effect: a funds saving plan worth 100 francs is set up with six inpayments. The fund units you receive in return vary substantially. Sometimes you receive more for your money, sometimes less. This allows investors to minimize the risk of selling at an unfavourable time of entry.

Keep sight of the long term

Anyone seeking to save regularly through funds and build up assets long-term can and should pursue this approach regardless of the current situation on the stock market. Funds saving plans are a particularly worthwhile option for long-term investors. The cost averaging effect, which often comes into play with the funds saving plan, enables you to make the most of market fluctuations over the longer term.

When it comes to funds saving plans, keep your cool

Anyone wishing to invest long-term rather than trading and speculating short-term should try to keep their cool – especially now – and not allow the ups and downs of the stock market to unsettle them. The best approach is to keep your investment in your funds saving plan over the longer term and only withdraw it in a well-planned way once stock market prices have recovered. Even though there is no guarantee of recovery, share prices have generally risen historically, even after stock market corrections.

This page has an average rating of %r out of 5 stars based on a total of %t ratings
You can rate this page from one to five stars. Five stars is the best rating.
Thank you for your rating
Rate this article

This might interest you too