As you may already know, DigiSave is a marketing name for the Plus Income Fund – A mutual fund managed by Black Star Advisors.
- A mutual fund is a company that pools money from many investors and invests that money in securities such as stocks, bonds etc.
- Because a mutual fund operates as a company, all investor contributions to the fund are used to buy shares of the mutual fund company. This makes you a shareholder of the mutual fund company.
- The price at which you buy shares of the fund is known as the fund’s share price. It is important to know the fund’s share price because it tells you how much one share of the fund is worth. For example, if the fund’s share price is GHC 1 and you contribute GHC 50 into the fund, you will own 50 shares in the fund. Your shares will be calculated as your contribution amount divided by the fund’s share price at the time of payment (GHC 50/GHC 1 = 50 shares).
Over time, the value of investment securities held by the fund increases or decreases depending on how financial markets perform. If financial markets perform well, your earnings in DigiSave will grow steadily. However, if financial markets perform poorly, your DigiSave earnings or principal may be negatively impacted. As the value of investment securities held by the fund increases with time, the share price of the fund also increases. Meaning, the value of your shares in the fund increases with time.
We will demonstrate this with our previous GHC 50 contribution example in the table below:
| DigiSave (Plus Income Fund) | Scenario A | Scenario B |
| Number of shares from previous example | 50 shares | 50 shares |
| New share price after one week | GHC 1.1 | GHC 0.9 |
| Value of shares after one week | GHC 55 | GHC 45 |
| “Total Balance” shown on DigiSave Dashboard | GHC 55 | GHC 45 |
| “Total Earned” Shown on DigiSave Dashboard | GHC 5 | – GHC 5 |
The fund manager of a mutual fund also reinvests already earned interest to allow shareholders to benefit from compound interest (interest on interest). Thus, the longer you stay invested in the fund, the faster your money grows over time because of compound interest. This also means that your already earned interest can decrease if financial markets perform poorly.
In summary, any time you see an increase in your DigiSave earnings, it means that the fund’s share price has increased. Conversely, a decrease in your DigiSave earnings or principal also means that the fund’s share price has decreased. The increase or decrease in share price depends on how financial markets perform.
As always, we will leave you with our favourite investment tip:
When it comes to investing, developing a good savings habit matters and plays a critical goal in meeting your financial goals. While it is necessary to set goals and have a plan, you also need to be consistent with your savings and always stay the course – thus sticking to your investment choice no matter the short-term fluctuations in value.
