Why You Should Automate Savings and Pay Yourself First

Why Automating Savings and Paying Yourself First Makes Sense for Unit Trust Investments.

Have you ever looked at your unit trust statement and wondered, "Should I add more money this month, especially with the market being a bit volatile?" 

The answer might surprise you. Here's why consistently adding money to your already-invested unit trusts, regardless of market conditions, can be a powerful strategy for building long-term wealth.

The Magic of Averaging:

This strategy is called Rand-Cost Averaging (RCA). By investing a fixed amount at regular intervals (monthly, quarterly, etc.), you purchase units at various price points. When the market dips, you snag more units at a lower price. Conversely, during market highs, you buy fewer units. Over time, this evens out the average cost per unit, reducing the impact of market volatility.

Think of it like this: Imagine buying groceries every week. Sometimes, your favorite cereal might be on sale, and other times, the price goes up. But by consistently buying the same amount each week, you pay an average price over time, regardless of weekly fluctuations.

Automating Your Success:

The key to successful rand-cost averaging is consistency. EasyEquities makes this a breeze with its automated investing features. Set up a debit order to automatically transfer a fixed amount from your bank account directly into your unit trusts every month. This "pay yourself first" approach ensures you prioritize your investments before other expenses, building wealth on autopilot.

But how does this translate to gains?

Let's look at an example. Imagine you invest R1,000 every month into a unit trust. Over a year, the market experiences ups and downs, with the unit price fluctuating between R10 and R15. By consistently investing, you'll have accumulated units at various price points. While it's impossible to predict the future, by continuing to invest, you're positioned to benefit when the market inevitably recovers.

The Power of Compound Interest:

RCA isn't just about averaging costs; it's about harnessing the power of compound interest. As your unit trusts grow, your future investments earn returns on top of those returns, accelerating your wealth creation over time.

Remember:

Investing is a marathon, not a sprint. Don't get discouraged by short-term market fluctuations. By focusing on consistency and a long-term perspective, RCA can be a powerful tool to build wealth and achieve your financial goals.

Ready to get started? EasyEquities offers a wide range of unit trusts to suit your investment goals. Explore your options and set up your automated investing plan.

Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.