Should I save monthly or invest a lump sum?
No doubt you will have come across these two methods of investing your money and may be asking yourself, which one is best? Some investors strictly lump sum invest, whilst others claim regular saving is the most sensible way to invest. Needless to say, either option is better than not investing at all.
First off, I am a fan of each method, choosing to invest with both strategies for my long-term savings goals. Others strictly lump sum invest and will argue just for that — each to their own. Let’s take a look at regular savings before assessing how this method can work to create a solid long-term savings portfolio.
Regular Savings
Stashing away a portion of your salary each month is a solid foundation for your long-term savings. Even better is when you invest that money, rather than simply deposit it in a low-interest bank account — mix that with high inflation and your long-term bank deposited savings, aren’t working for you.
Investing through a regular savings platform, benefits from “dollar-cost averaging”. Rather than investing a lump sum, you contribute a regular, monthly amount into an investment regardless of market conditions and continue to do so over the long-term, say 10-15 years or more. This is often called “drip feeding” into the markets.
Locking this money away yields the benefit of compound interest, in the long run — your best friend when it comes to investments — as the “interest on interest” spikes into high returns over time.
Reduces Risk
Investing like this takes away the element of market timing, meaning you consistently buy no matter a low or high environment.
Discipline
Investors are notorious for buying high and selling low, driven by their emotions and market “noise“, paying the price for trying to time the market (which rarely pays off). Dollar-cost averaging takes away market timing by consistently contributing, no matter the conditions. Better yet, setting up an automatic investment of this kind creates a simple yet effective “set and forget” strategy, keeping you saving each month without too much thought. Similar to your bill payments and mortgage.
Access to Inaccessible High-End Funds
The reason for this is that many mutual fund companies waive their initial minimum investment to investors who set up a regular investment plan, granting the beginner investor easy access to high-quality, otherwise inaccessible funds, from as little as a couple of hundred dollars a month.
To discuss our range of regular and lump sum savings options, please contact me. I will be happy to help with whatever questions you may have.
Rob.
E: robert.gourlay@holbornassets.com T: (+6) 01151565649 W: www.rgwealthsolutions.com
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