Recurring investments are just what they sound like: Investments you make at a regular tempo into a portfolio of stocks. When you remove the human factor and make investing automatic, you set yourself up for success. Not convinced? Let’s back it up a little to the beginning.
The main reason for investing your money and not letting it sit in a savings account is so that you don’t lose your net worth to inflation. When you just save your money, sure, it will still be there in 40 years – but it won’t be worth that much. A loaf of bread in 1982 was about 50 cents, that won’t get you a handful of crumbs now.
If protecting your money from the burn of inflation is your only concern, then a savings account or super-safe government bond may be what you’re looking for. But, if you want to do more than break even, you have to make some bigger moves.
Goals like retirement or starting a business are on most of our minds. And, chances are, most of us won’t get there by saving alone, so we need to take on more risk. Riskier investments come with historically higher rewards. Stocks, bonds, ETFs, and mutual funds are all examples of riskier investments.
When should I start investing?
The old joke says it all: The best time to start investing is March of 2009; the second best time is right now. You’ll never be able to predict the market downturns, but when (not if!) they happen, you’ll be able to catch the upswing by getting in early.
Case in point: A person who starts investing in a portfolio with an average 7% return at age 25 needs to save only $50,000 to end up with $600,000 by the time they’re 65. But! If that same person waited until age 35, they could invest three times that figure and still wind up with less money in the long run.
How do you get started?
The first and easiest step is your 401k. Most of us have some kind of retirement savings program through our work, and some of us are even lucky enough to get a match from our employer on the funds we deposit. Always take the match! It’s free money and you never want to pass up free money.
If you’re on your own, working that gig economy lifestyle, or just getting your business up and running, it’s a little bit tougher to save for the (possibly very far away) future. Automatic investments are the way to go when you’re setting up a no-brainer investing approach – and when you pair that with a savings vehicle designed for the long-term, it’s a sure bet.
An IRA is a great choice for regular retirement investments, and there are loads of options. Check them all out here and get started.
What’s the trick?
The true magic is in the simplicity of repetition. By making your mind up and getting started, you’re already ahead of the game. Next up: Make it a habit. If retirement is your goal and time is on your side, then get to it. Setting up recurring investments not only ensures that you get a great price on the stock you buy (through dollar-cost averaging), but it’s just about as easy as anything can be. Set it and forget it.
Don’t lose your mind over money
If this all seems like too much, take a deep breath. While you can’t really control whether the market goes up or down, you can control how you react. Conventional wisdom may be prompting you to sell when it’s actually time to buy, and vice versa.
If you buy whenever everybody is buying and sell when everyone is selling, you’ll do really badly.
The best path to a wealthy future as an investor is to first learn what you can — then relax, and keep it simple. While you might feel too young and broke to consider yourself an “investor” just yet, remember not to sell yourself short.