Case study
Mini investment masterclass
Example:
Mr X decides to invest £1,000 a month
into a regular savings plan. At the
end of the
first year, Mr X has purchased
13,558.26 units and each unit is
currently worth 90p.
The value of Mr X’s plan is therefore:
£0.90 x 13,558.26 = £12,202.44.
If Mr X had invested £12,000 as a lump
sum in January when the unit price
was £1.00, he would have purchased
12,000 units. The value of his plan at
the end of the first year would
only be:
£0.90 x 12,000 = £10,800.
By paying his contributions monthly,
Mr X is able to reduce the market timing
risk.
And, although the unit price has
fallen by 10% over the course of the
year, Mr X’s plan has in fact grown
by 1.69%.
| Month | Monthly contribution | Unit price | Units purchased |
|---|---|---|---|
| January | £1,000 | £1.00 | 1000.00 |
| February | £1,000 | £1.10 | 909.09 |
| March | £1,000 | £0.80 | 1250.00 |
| April | £1,000 | £0.70 | 1428.57 |
| May | £1,000 | £0.50 | 2000.00 |
| June | £1,000 | £0.60 | 1666.67 |
| July | £1,000 | £0.90 | 1111.11 |
| August | £1,000 | £1.10 | 909.09 |
| September | £1,000 | £1.40 | 714.29 |
| October | £1,000 | £1.60 | 625.00 |
| November | £1,000 | £1.20 | 833.33 |
| December | £1,000 | £0.90 | 1111.11 |
| Total | £12,000 | 13558.26 |
