We hear from people everyday that they have goals of accumulating wealth and becoming financially secure one day. Many people think they will have some big sale, new job promotion, or some big win to generate this wealth. The truth is the one tried and true way toward creating financial security for you and your family is to systematically invest every month.
It may not seem like this would make a big impact, but if you flash forward years or decades, the results can be mind-boggling. This can happen because of many reasons.
One is it forces you to save every month. This creates a habit to where you will change your lifestyle as well as your values. If you suddenly are living off $400 a month less, you won’t find the need to go out to eat 4 times a week, or make that extra trip to the coffee shop. It can create a new value system that your money has a very specific use and they are the necessities to survive each month as well as things that can generate income or appreciate in value.
Next is compound interest. This phenomenon can produce exponential growth over the long term. There are also many investment accounts that have either potential tax free growth or tax-deferred growth, which means you are not paying out taxes each year like you would for your ordinary income.
Lastly, is it is much more palatable to save and invest a few hundred dollars or a thousand dollars a month as opposed to $20 or $30 thousand all at once. You also hedge your risk as you invest into the market. Consistently purchasing investments each month means you’ll buy some high some low, and some at a break even mark, but you don’t have the risk of investing a large sum all at once.
If you are still learning about investing, we’ve found this is the best way to get into the game and start building your financial future. You have the ability to increase, decrease, or stop at anytime, so you still have control of your finances. Monthly investing is one of our first suggestions to people focusing on their finances.
Securities offered through LPL Financial, Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. This is a hypothetical example and is not representative of any specific investment. Your results may vary. 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.
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