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I have a good amount of money in a unit trust through a financial adviser with a large local fund manager, but I feel it’s not growing. I’m thinking of moving over to government retail savings bonds or African Bank. The money is long-term savings and not with a particular goal in mind. I have retirement annuities and tax-free savings accounts already. Which would give the best payoff in the long term?

— Fat Wallet Community user

Several issues are raised here and the first is the performance of your fund. You say it’s not doing well, but over what time period? Locally and globally all markets are down over the past six to seven months, so it would not be surprising to see your unit trust also down over that period. If you’re worried about the fund you’re invested in, it’s important to look longer term and compare against the benchmark, check the fee structure (including adviser, fund and platform fees) and consider how it does against a passive exchange traded fund, after fees.

If the fund is still doing dismally, then moving may well be the best course of action. The question then is where to move to. Right now savings and cash products are beating the market, but this is not what you would expect long term; this is because markets are under pressure.

The other thing to consider is that cash or savings products are very much for short-term use, such as an emergency fund or maybe savings for a holiday, education or a deposit. If the investment is for the long term (typically more than three years), the equity market is absolutely the right place even if we see no, or even negative, returns at times. This is normal and we should ride out these periods. The good days will return.

So, certainly check the longer-term performance of your fund and the associated fees, but if you’ve got your short-term savings needs sorted, rather switch to a lower-cost equity fund to keep the long-term benefit of equities.

— Your Money team 

Send us your questions to yourmoney@fm.co.za

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