The Motley Fool

Part 6: The Benefits Of Regular Investment

Plumping for an index tracking fund takes a lot of the worry and stress out of investing. However, you may still be concerned that you might invest at the wrong time, for example when the market hits a temporary peak.

Tune out the noise

The trouble here is that you never know what the sharemarket will do next. Many column inches are devoted to predicting the short-term direction of the market, but it is all just pure speculation. No one knows which direction the market is heading although that doesn’t seem to stop everyone having an opinion, sometimes even including us.

The best thing to do is ignore all this noise, which we appreciate is easier said than done.

The key thing to appreciate, in our opinion, is that the long-term direction of the market is upwards. You can’t time your entry to perfection; the most important thing is taking part. There’s an old investment saying that’s worth mentioning here — it’s about ‘time in the market’ not ‘timing the market’. Clever, eh?

Pace yourself

An excellent way of pacing your investments is by regular investment of say $100, $150 or $200 a month into an index tracking fund. Or even more if you like.

Some funds allow an additional investment of a minimum of $100 when sent by BPAY. Why not set up a regular monthly, or even weekly or fortnightly, payment? You’ll hardly notice the money is gone, but you will notice the effect it has on your long-term wealth.

Setting up a regular investment is also a good discipline, meaning that you effectively force yourself to invest every month. It’s a good habit to get into.

Likewise, when you finally cash in your investment, the reverse of this strategy makes sense. Rather than taking your money out in one go, you can sell gradually. Of course, you may decide that the sharemarket is the best place for your money in perpetuity and that you intend to live off the dividends and let your capital grow further.

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