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Baht/$ 34.36/41 (Bid/Ask)
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14450
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NET WORTH
ANDREW WOOD
Last week we discussed ways in which you can successful manage your existing portfolio in stormy market conditions. The use of an Offshore Personal Portfolio Bond (OPPB) can assist in many ways. But supposing you actually don't have all that much wealth to manage and protect? Maybe you are one of the expats here who has bought a property or diverted what you have in other directions delaying the accumulation of liquid wealth until sometime later. You may now be faced with the possibility that you have a decent income and want to save but you are nervous about where to safely house your savings and make them grow successfully.
A life-changing opportunity is actually staring you in the face right now. It is very simply a regular savings plan. These can generally be structured from five to 25 years according to your situation and requirements. You may want to make provision for your retirement, your children's tertiary education or possibly saving for a specific reason. Maybe you just want to accumulate some savings.
Savings plans are held by a custodian institute. It is always best to choose a reputable organisation and there are a number of very good ones. Most are based in tax havens where there are guarantees, in the unlikely situation that the institute should fail. Under such circumstances you would be paid up to 90% of the value of your investment by the government. Such guarantees have no ceiling.
Your regular monthly contributions are fed into your plan and used to purchase units in a variety of investment funds available on the markets today. This can be arranged for you through a professional financial adviser who will also be able to manage your investment within the savings plan structure on your behalf. A true professional will ensure that you are buying units in a variety of diverse funds and that they do not specifically correlate together so that your risk is well spread.
The real bonus here is that you will benefit from dollar-cost averaging. This is the purchasing of units in funds when prices are low. If you start now, in the early part of your accumulating investment you will purchase more units in the allocated funds each month. As time goes by, the markets will grow once more and you will benefit from the increased unit prices within your fund. Not only that, but you will also benefit from holding more units to sell at these higher prices when your plan comes to maturity and you receive the value of your savings plus growth.
Let's say we invest 1,000 per month in a savings plan for 10 years. Fifty percent or 500 goes into the ABC fund. The price today is low because of market conditions and further drops take place in the first year and then the fund takes two years to really start to grow.
Similarly, 50% or 500 is invested in the XYZ fund each month. This fund price grows in a straight line all the way through the investment period. We shall also assume that the final fund unit price for each fund is the same. Thus each fund has achieved an overall growth of the same amount. The chart shows the purchase pattern of units in the fund.
In the example in the chart, the same amount has been invested each month over the same period and the final unit price of each fund is identical. Dollar cost averaging has increased the value of the ABC Fund because the unit price of the fund was low in the early years and more units were purchased. Therefore, at the end of the 10 year savings period ABC fund unit holdings are much higher than XYZ fund unit holdings. As the final unit value of each fund is the same there are more units held in ABC fund and thus the investment value is higher.
Do not miss this opportunity to increase the power of growth. Contact an independent professional financial adviser today and find out how you can sign up to one of these plans and make the most of the current market downturn.
Questions to the author can be directed to Barclay Spencer International on 0-2653-1971 or e-mail to info@barclayspencer.com
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