Regular investing is a strategy where you invest a fixed amount on a regular basis. Integrating this type of discipline into your investment approach ensures continuous investing regardless of market performance.
By investing regularly, you apply a “savings first” approach to managing your finances. Many investors find it easier to set aside a small amount on a regular basis rather than come up with a large, lump-sum investment.
Why It Makes Sense
There are two key advantages to regular investing. First, it allows you to invest smaller amounts of money on an ongoing basis, which is typically easier on your budget. Second, it gets your money working for you right away to maximize your opportunity for returns. And with dollar cost averaging, you don't need to worry about the right time to buy because you're always investing.
Investing your savings frequently allows more time for your money to grow. The illustration below shows that over time, the value of a monthly investment plan exceeds annual lump-sum contributions, assuming a consistent monthly return of 7% annually.
Your Monthly Savings Can Really Add Up
| Number of Years Invested | Monthly Contribution Amount | |||
|---|---|---|---|---|
| $50 | $100 | $250 | $500 | |
| 5 | $3,489 | $6,977 | $17,443 | $34,885 |
| 10 | $8,194 | $16,388 | $40,967 | $81,940 |
| 15 | $14,541 | $29,082 | $72,705 | $145,409 |
| 20 | $23,102 | $46,204 | $115,510 | $231,020 |
| 25 | $34,650 | $69,299 | $173,249 | $346,497 |
Assumes a 6% Annualized rate of return.
Source: RBC Global Asset Management Inc.
How It Works
Instead of trying to accumulate one big lump sum and parting with it on a yearly basis, you can budget for smaller amounts. With tools like our Monthly Purchase Plan Calculator, you can determine the appropriate monthly amount needed to achieve your long-term objectives. You also have control over the investment frequency with the choice of weekly, biweekly, semi-monthly, monthly or quarterly contributions, depending on your individual needs and goals.
