Regular, ongoing investing is a fundamental strategy for achieving financial goals and building long-term wealth. And the beauty of this strategy is, it doesn’t matter how much you have or when you start, because anyone can do it.
What do I mean by “consistently”? You can start with as little as $25 per month and continue to invest those dollars each and every month – other people call this dollar-cost averaging. By automating the process, you’re taking the emotion out of investment decisions.
Why Consistency Matters
Harnessing the Power of Compound Interest
Consistency allows you to take full advantage of compound interest. Over time, your investment gains can generate additional profits, creating a snowball effect. The longer you invest consistently, the more powerful this compounding becomes.
Mitigating Market Volatility
Investing consistently helps smooth out the impact of market fluctuations. When you invest regularly, you buy assets at different price points, reducing the risk of making significant investments at market highs.
Forming Good Habits
Consistency in investing builds discipline and financial responsibility. It establishes a routine that can be applied to other aspects of your financial life.
Tips for Investing Consistently
Automate Your Investments
Set up automatic contributions to your investment accounts, such as a 401(k), IRA, or brokerage account. Automation ensures that you invest regularly without the need for constant manual intervention.
Establish Clear Financial Goals
Having specific goals motivates consistent investing. Whether saving for retirement, a down payment on a house, or your child’s education, knowing why you’re investing can help you stay committed.
Create a Budget
Develop a budget that outlines your income, expenses, and savings goals. Allocate a portion of your income for investing and treat it as a non-negotiable expense.
Start Small if Necessary
If you cannot invest large sums of money initially, keep going. Start with whatever amount you can comfortably afford, and increase your contributions as your financial situation improves.
Diversify Your Portfolio
Diversification spreads risk and can help you feel more confident during market downturns. One index fund or exchange-traded fund can provide plenty of diversification for beginners!
Stay Informed
Continuously educate yourself about the broader financial markets. This knowledge can boost your confidence and help you make informed decisions.
Stick to Your Investment Plan
Avoid making impulsive decisions based on short-term market fluctuations. Develop a long-term investment plan that aligns with your goals and risk tolerance, and stick to it.
Review and Adjust
Periodically review your investment portfolio to ensure it remains aligned with your goals and risk tolerance. Adjust as necessary, but change only a few times a year.
Stay Patient and Ignore the Noise
The financial markets can be noisy, and media headlines can be sensational. Stay focused on your long-term goals and avoid reacting emotionally to market news.
Investing consistently is a tried-and-true strategy for achieving financial success. By automating your investments, setting clear goals, and staying disciplined, you can harness the power of compound interest and build wealth over time. Remember that consistency is the key to long-term success, and your financial future will benefit from your commitment to regular investing!
And BTW, if you’d like some help in this area, you can work with a financial planner to develop a DCA Plan you can implement on your own.
Samantha Kirby, CFP® brings more than 15 years of experience in finance and accounting to Creative Money and loves combining her knowledge and experience with down-to-earth practical advice. Sam is based in Bellingham and spends her downtime as the matriarch of a family of 5 who like to tempt fate with death-defying activities like mountain biking, hiking and generally running through nature exposed to predators (husband included). Read more about Sam here…
