Monthly Savings
Saving is setting money aside for expected future use that could be a short-term goal like planning a holiday or a long-term objective like retirement or paying for your child’s education. While saving is a good habit, simply leaving it with a bank may not earn you a healthy rate of return to afford the kind of lifestyle you desire.
While investing involves greater risk, it also offers greater growth for your money. A regular savings programme is a good way to start with personal investing. A disciplined way to put aside a percentage of your income on a monthly basis, investment savings programmes can help you benefit from dollar cost averaging.
Before deciding on a direction to achieve your financial goals, understanding your time-frame would determine the right blend of assets to match your needs.
Investment Time-frame
- 1 to 3 years is short-term
- 3 to 10 years is medium-term
- 10 or more years is long-term
Dollar Cost Averaging
Simply by investing a fixed amount of money at regular intervals over a period of time, you can lower the average cost of investments. More units can be purchased during a market downturn and fewer units during an upswing. Over time, the cost per unit evens out. A regular monthly savings programme is a great way of taking advantage of dollar cost averaging.
How Dollar Cost Averaging Works
At the end of 5 months, 65 units have been purchased worth $10 each making a total of $650 while your investment outlay is only $500, giving you a profit of $150. At the end of month 5, the average cost of each unit works out to be $8.20.
Before you commit to a monthly savings program, below are some important pointers to consider.
- Portability
- Currency
- Tax Efficiency
- Investment Timeframe
Lump Sum Investments
In this environment of rising inflation and low bank interest rates, most people understand that leaving their hard earned funds in the bank is rarely the most sensible thing to do.
Inflation in many parts of the world (including here in Singapore) is now almost 5%, whilst banks offer less than 1% per annum for cash left on deposit; a 4% loss in real terms every year! However, the alternative – investing the money – doesn’t always appeal either.
Due perhaps to past experiences, poor advice or simply a lack of time to investigate options, many savers are under the impression that investing into the stock markets involves lots of risk, and is best left to the experts. Also some worry that they will feel ‘disconnected’ from their money, as it will be invested into areas that they don’t understand.
The good news is that both of these problems can be addressed by choosing the right
adviser. A well qualified and experienced financial adviser will have the skills to be able to explain all your options and help to recommend solutions that you feel confident and comfortable with.
The AAM Investment Committee works with you and your AAM Advisory adviser in order to provide ongoing advice and information as the economic environment and your circumstances change. AAM Advisory is also committed to ensuring that you always feel connected to your money; through our feedback and service standards but also through making sure that all our advisers have the knowledge and skills required to explain the rationale for all of our recommendations.
