Makabongwe writes:

I believe in investing for growth but I don’t have sufficient knowledge about unit trusts. Currently I have invested in Allan Gray unit trusts via debit order. I am worried that I have not selected the correct funds, namely the Stable fund and Balanced fund.

Maya replies:

It depends on how long you are investing for. The shorter the period then the less risk you want to take. The longer you invest the more growth you require for your money to grow ahead of inflation.

So if you are investing for less than five years you should invest in the Stable Fund as this has a low percentage invested in the stock market.

If you are investing for longer than five years then the Balanced Fund is a good option as this fund has a greater percentage invested in the stock market and will outperform the Stable Fund over time.

However, the Allan Gray Equity Fund should perform the best out of all three Allan Gray funds over time, as it is fully invested in the market – but it could see the value fall in the short term in line with market fluctuations.

The fact that you are investing monthly greatly reduces your risk of losing money in the short term. This is because if the unit price falls (because the shares it invests in have fallen in price), then you are buying more units with the same amount of rands. It is a bit like getting a “3 for the price of 2 deal”. Given this scenario and if you have a longer-term investment time frame, you may want to consider investing into the Equity Fund.

This article originally appeared in City Press