Let’s assume you are investing CHF 100 a month into a fund  A fund is a “pot” into which investors put money. This is invested by the fund management in various securities, such as shares or bonds, based on certain criteria. This means good diversification can be achieved even with a low level of investment. There are various types of funds: if a fund invests in shares, it is called an equity fund. Real estate funds invest in property. over a longer period of time. If the price of a unit in the fund (the unit price) is low, you automatically obtain a larger number of units. If the prices are higher, you receive fewer fund units accordingly. This means the average price you paid for all of your fund units is lower than if you had purchased all your units at the most unfavourable point of entry – but also higher than at the most favourable time. As a result,  investors reduce the risk of an “unfavourable” point of entry with high prices. They do not invest at the best time either but reduce the risk of only buying units when the price is high.

Buying units regularly with a funds saving plan

A funds saving plan can also help you to invest a fixed amount every month in a disciplined way. The big advantage is that it remains flexible. Investors decide for themselves how often they make payments which can also usuallly be skipped. The funds saving plan is therefore a useful tool for regular saving and ideal for accruing assets over the long term.

The following graphic shows an example of how you can benefit from the cost averaging effect with the funds saving plan: you automatically purchase fund units for CHF 100 a month and receive 6.33 units for CHF 600 after six months. If you had just purchased these 6.33 units on a particular day when the price was CHF 105 per unit, you would have paid CHF 664.65. If you had paid CHF 600 on the start date, you would only have received 6 units. The funds saving plan therefore enabled you to generate a return of CHF 64.65.