Years ago, I remember my parents telling me to put a regular amount every month into a savings plan. (I wish I had listened more carefully!)
This was in the days before pension plans, with all their tax benefits. I also remember being told that if you invest in a regular savings plan, such as a unit trust plan, it doesn’t much matter whether stock markets go up or down – “you will benefit from pound cost averaging”.
So what is pound cost averaging? In simple terms, it means that if the market value of your unit trust savings plan falls, it doesn’t matter: the cost of the next unit (or units) you buy will be cheaper – so the average cost of all the units you hold will have reduced. (For those of us who don’t have lump sums
to invest, it is quite good to know that it’s not all doom and gloom if the markets fall!)