Subscription services seem to be the latest business model for attracting new users and building a good customer base. For $10 a month, take all the gaming you can handle. $20? Every movie that ever existed at your disposal. Why should you think any differently when it comes to saving money?
I urge you to think about viewing retirement savings the same way. Customize the subscription now, then set it and forget it. That way, you can ensure your retirement savings and investments, stay on track.
Understanding Your Investing Subscriptions
As you have probably figured out by now, this type of investing isn’t anything new. Dollar cost averaging is the system of making regular contributions to your investment account on a fixed schedule. Dollar-cost averaging has proven to be one of the best ways to build savings over time while seeking to reducing volatility. If you have a 401k or any other workplace retirement plan, you’re already up and running.
Dollar cost averaging smooths out your purchase price over time and strives to ensure that you’re not putting all your money in at a high point for prices. This type of investing can be especially helpful in a down market, allowing you to purchase stock at low points when many investors are too afraid to buy.
There are three clear benefits of dollar cost averaging:
Avoid mistiming the market *Spoiler Alert* you can’t time the market. So don’t bother trying.
Take the emotion out of investing – Set it and forget it
Thinking in the long term – Consistently add to your retirement to build your wealth
Anything is Better Than Nothing
Investors are prone to making emotional trading decisions as the market fluctuates, so dollar cost averaging saves them from those psychological biases and helps you stick to the plan no matter what happens in the markets.
The easiest way to do this is set up your payments just like your subscriptions: biweekly, monthly, or quarterly recurring investments at an amount that’s right for you. It’s just like how you automated your Spotify, Netflix, food delivery, shave kits, and the monthly flower subscription you signed your spouse up for on Valentine’s Day.
So, how much do I invest? I’ll just say this… ANYTHING is better than nothing and starting sooner is better than later. Come talk with us if you have questions about what to put it in. Talk with your advisor about dollar cost averaging for what best fits your financial plans.
March 2021
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal.
Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
