I have written about this a couple of years ago, but it will be good to mention it again, especially after my trilogy early this year about the workings of unit trust funds.
For those of you who watch your investment values (too) often, you will have notices drops in value of 3 or 4 or 5% in the last month or so. If you are adding to your investment’s on a monthly basis, either through debit orders into unit trust funds or retirement annuities, or monthly contributions into your employer pension fund, or if you are not using all your income from your Marriott funds and you have reinvesting income (which to me is like doing monthly savings), then it is actually good for your investments to sometimes have these drops in market values. This because your money being added during these ‘down months’ is buying cheaper units in your funds and therefore buying more units (more assets) for you than you would have been buying, had the markets not gone down.
Using some simple numbers, let’s say the market went down 5% in the middle of September. Your debit order now in October bought units at a 5% lower price than in September. Then let’s assume the markets go up by 3% again by the beginning of December. The value of the units you bought in October and November, have now gone up by that 3%, yes? However, the units you owned before this, have now only recovered 3% of their loss, and hence are still down 2%.
This is also an argument for increasing your Retirement Annuity monthly contributions vs. making too large a once-off addition at the end of the tax year.
I hope my basic example sort of makes sense.
Then….. maybe it’s important to go back to my story of a few weeks ago, around the matter of medical aids paying for treatment and hospitalisation for riding unlicensed and non-road legal motorbikes in the forest…. Well, this week I found my original notes around that topic and I see that I wrote down that I would not get cover for accidents if riding in Lesotho, Namibia etc. We all think of international travel insurance for going overseas, but I definitely have never thought about this for popping over into Lesotho for a couple of days. Just a thought for those of us who might do that little holiday visit into Lesotho, Swaziland, Botswana, Zimbabwe, Mozambique etc.