We all know that investing is essential for our financial future, but how can we make it easier? The easiest and best way to invest is automatically. Moving money straight from your account to your investments can create a strong path to wealth. But it’s not just about stocking money away, it’s so much more than that.
The magic of compound interest
The real trick behind recurring investments lies in the magic of compound interest. When you reinvest your investments you’re compounding. Compounding is when you generate a return on your original investment plus the interest. To do it, you just need two things: the reinvestment of earnings and time. Compounding interest takes your initial investment and makes it grow before your eyes. For younger investors with lots of time on their side, it is the greatest investing tool imaginable, and the best reason to begin investing as early as possible.
More bang for your buck
To really get the biggest bang for your buck, you need to ensure that you get the best price on stocks when you buy. So how do you do that? It’s easier than you think. Dollar-cost averaging (DCA) is the investment strategy of spreading out your stock purchases and buying on a recurring basis in equal amounts - sound familiar?
When you invest this way, you average out your purchase price over time and ensure that you’re not jumping in at a high point for stock prices. It’s impossible to time the market – the experts say to not even bother trying. Instead, purchase throughout the year and the price you’ve paid per share will be averaged out over the highs and lows of the past 12 months.
Make it a habit
The biggest hurdle in making recurring investments is actually doing it. If you’re concerned about finding money each month to repurpose for investing or if you’re unsure of how much you should be investing, you’re not alone. Our best advice is to set up a recurring monthly investment that falls within your budget. Having trouble setting a goal or wondering how much you should have saved? This savings guide can give you some direction.
Reach your goals
When you clearly state a goal and create a plan, you’re already halfway there. When you invest instead of saving it’s like supercharging your money. The average savings account has an interest rate of just 1.5%. Swell’s combined portfolios are up 27% this past quarter*.
Whatever your goals are — planning for retirement or buying a home or taking a big vacation — they dictate your time horizon and your risk tolerance. Reach them faster by choosing to invest over plain old savings. Take it a step further by choosing to set up recurring investments and making it automatic.
*Since inception (9/30/2016) through March 31, 2018, Swell’s combined six portfolios have outperformed the broad market portfolio (S&P 500). Swell total return net of fees for the second fiscal quarter of 2018 was 26.95% and the S&P 500 total return was 25.51%. Past performance is not indicative of future results.