I have been advised to transfer all my unit trusts into money markets as this is the “right” time as the unit trust market is going to drop again. Marius Fenwick Profile Mail The term ‘unit trusts’ is used very broadly and generally, it is assumed that ‘unit trusts’ are all linked to the stock market and other volatile assets. Generally, it is also assumed that if the market crashes all unit trusts will follow suit. This is not true.
At least then you know exactly how much money you will have available to spend. If you stay invested in growth-type unit trusts you have no idea how much or how little you will have available to spend in two years’ time. The best time to invest, especially on a regular monthly basis, is when markets are distorted and people are selling – as you are now considering doing. Your losses will turn into someone else’s future profit if you sell now.
Instead of trying to time markets, rather spend time creating a proper financial plan and implement an investment strategy. A very simple solution is to adopt the ‘three-tier bucket system’ as outlined below.Determine what your cash requirement will be over the next two years. In other words, how much money do you intend to spend over the next two years? This does not include monthly budget items like food, bonds and so on, but capital expenses like holidays, weddings, or a deposit on a house.
Hopefully the above will provide you with some guidance. It will be advisable to consult with a suitably qualified financial advisor to assist you with your decision and to create a meaningful financial plan.
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