Which risk is Jackie, who saves monthly in a unit-linked savings plan, least exposed to compared with Mark, who plans a lump-sum investment in the same fund?

• A. Inflation.
• B. Counterparty.
• C. Timing.
• D. Interest rate.

Answer: (C)

The important idea is timing risk and how spreading investments changes the entry point into the market. By saving monthly into a unit‑linked plan, Jackie purchases units gradually over time. That means she buys at a mix of price levels, so her average purchase price tends to reflect the market over the period rather than a single, potentially unfavorable moment. This approach lowers the risk of mistiming the market—i.e., risk tied to investing a large sum when prices are high or just before a downturn.

Mark, by contrast, commits a lump sum at one moment. If that moment coincides with a high price level or a market dip right after he invests, his entire amount is exposed to that single point in time. That makes timing risk much higher for him, because there’s no smoothing effect from spreading purchases out over several months.

Inflation, counterparty, and interest-rate risks are still present in both scenarios, but they don’t illustrate the difference in exposure as clearly as timing risk does. The regular, incremental approach reduces the impact of timing decisions, making Jackie least exposed to this specific risk.