What is a regular savings plan?

A regular savings plan is an arrangement you can create with (generally) a fund manager to invest an initial lump sum followed by regular investment instalments; the most common instalment period being monthly.

Minimum monthly investments usually start at $100. You can nominate your own amount above this according to your cashflow and what you can afford to save.

The regular payments can be deducted from a nominated bank account. This monthly payment is then invested on your behalf by the fund manager in the same manner as the initial investment, which might be in shares or bonds for example, depending on the fund you have chosen.

When you invest in a managed fund, you own 'units' in the fund. The value of the units in the fund will rise and fall with the value of the underlying assets it owns.

How much do you need to start?

You can start a regular savings plan with a fund manager with as little as $1,000. This will enable you to start growing your wealth and start saving for a long-term goal, such as:

  • a deposit for a home, or home renovations
  • future holiday
  • children's or grandchildren's education

Benefits of regular savings plans

Regular savings plans enable you to invest your surplus income at a flexible level while allowing you to access your funds if required. Other benefits include:

Easy investment plan – direct debit from your bank account each month. Ensures a "forced saving" regime for your surplus cash.

Reduced investment cost – via 'dollar cost averaging'. By implementing a regular savings plan you gain the benefit of purchasing investment units at different prices which helps reduce the risk of mistiming the market. Your regular investment purchases less units when prices are high and more units when prices are low. By averaging the unit price paid, your investment cost is reduced. This is 'dollar cost averaging' and means that you don’t have to worry about where share prices or interest rates are headed.

Compound interest "multiplier" – by re-investing your distributions rather than taking the cash, your investment capital benefits from the effect of compound growth; which means, the distribution from your investment also earns interest.

Tax benefits – when a regular savings plan is invested via a specific education savings bond, tax benefits can be enhanced further for education-related expenses.

Flexible access to your funds with the ability to vary or suspend contributions.

How much do you need to invest each month to reach your target?

Below is a an example of the savings targets you would reach over a set period of time, based on the amount you contribute per month (calculated using an average return of 6.5% per annum).

Net rate of return of 6.5% pa, and no entry fees. Initial investment of $1,000. Source_ Morgans

Choosing a managed fund

There are thousands of managed funds to choose from. It's important to understand the different types of funds, the risks and returns, so you can choose a fund that meets your needs.

Morgans advisers are qualified to help you choose an investment fund that’s right for you and put in place an appropriate savings plan to help you achieve your financial goals.

If you would like more information, please contact your nearest Morgans office for an obligation-free discussion.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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