How can you invest periodically without investing time?
Do you periodically have a certain amount of money left over that you don’t actually spend? Then it is wise to invest this money! When you have little time, it can be difficult to do this actively: fortunately, there are plenty of opportunities for successful periodical investing without a large investment of your time. In this article, we will discuss the best ways to make periodic investments.
What is the best way to invest periodically?
You can decide whether you want to make active or passive periodic investments. Let us briefly explain both options.
Passive periodic investing
Passive investing has its advantages: by investing passively, you do not have to make the difficult investment decisions yourself, and you also save on transaction costs in many cases. You can invest periodically by depositing a fixed amount each month in a fund. Such a passive fund is also called an ETF and is freely tradable on the stock exchange.
A good party where you can invest periodically in a fund is DEGIRO. At DEGIRO you pay no purchase or selling costs for the funds that are included in the core selection. Use the button to open an account at DEGIRO:
Active periodic investing
You can also choose to invest a little more actively on a regular basis. You can set aside part of your money each month and use it to buy shares. That way, you have more control over where your money ends up. For example, you could decide to invest your money only in sustainable initiatives.
Especially when you invest smaller amounts, it is advisable to do this at a broker where you pay no commissions. If you make many transactions and pay for them each time, your return can quickly fall. At eToro, you can buy all well-known stocks without paying commissions. Use the button below to open an account at eToro immediately:Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees.
Why would you invest periodically?
Periodic investing has several advantages. In this part of the article, we discuss why periodic investing can be attractive.
By investing periodically, you spread your risks. It is difficult to predict the future, and it would be unfortunate to invest all your money at the top of the market. By constantly putting in a fixed amount, you step in when the price is high and when it is low. This gives you a more stable return.
By investing periodically, you will slowly see your deposit and return grow. Moreover, due to the power of compound interest, the speed at which your return grows will increase.
Another advantage of investing periodically is that you can do so at low costs. At DEGIRO, for example, you pay no purchase or selling costs when the funds are listed in the core selection. Lower costs can automatically lead to a higher return.
Are you short of cash for a change? In that case, you can skip a month. With periodic investing, you are not tied to anything, so you can always pause your investments. It is a good idea to invest continuously, as this is the best way to spread the risk.
Periodic investing also provides a lot of peace of mind. When you periodically deposit a fixed amount, you do not have to think about a strategy. Even when things are not going as well, you can just sit back and relax: you will only buy your shares at a cheaper price.
Since with periodic investing, you don’t have to make many decisions, this investment method is also suitable for beginners.
Periodic investing in the stock market makes sense!
Many people do not believe that it makes sense to periodically invest an amount of 100, 200 or 500. Nothing is less true. Sure, the average return of 6-8% on $100 doesn’t get you very excited. However, you forget something important when you assess your investments in this way.
This is because you will also receive a return on your return the following year. This means that every year you receive a higher relative return in relation to your initial sum. If you are smart, you can become a millionaire with periodic investing, even with small deposits. Of course, the stock market climate has to be favourable.
Is periodic investing something for you?
Periodic investing is not suitable for you if you need your money anytime soon. Investing for the long term only works when you can miss the money for a longer period. Therefore, periodic investing is suitable for the patient investor who wants to build up a nice capital in the long run.
That periodic investing can work out beautifully can be seen when you run the numbers. In the book A Random Walk Down Wall Street by Burton G. Malkiel, for example, you can read how an investor invested his first 100 dollars in the Vanguard 500 Index Fund in 1978. He kept this until 2013, and with a deposit of $44,000 he achieved a total result of $480,000. This clearly demonstrates the power of periodic investing.