You want to improve the return on your savings and make your first steps in the investment world but don’t know how to do it? Why not try regular investments? This financial solution is to invest on a regular basis (every month or every quarter) the same amount of money, fixed in advance, in an investment fund. Here are the main advantages.
You can invest small amounts
To invest regularly, you don’t need to budget huge amounts: a few euros are enough. Choose a diversified investment fund which will give, over time, a higher yield than your savings account. Make sure there are no entry or exit fees and set up your standing order.
Your investment is protected against market fluctuations
Investing involves risks, there is no way around it. Although you don’t have an absolute guarantee that you can recover the capital invested with a regular investment plan, by choosing a long-term investment you reduce the overall risk: over time the market’s highs and lows are smoothed out. By investing at different times you invest at an average price, benefit from a stable return and don’t need to wonder if you have chosen the right moment to invest your money.
You don’t need to be a well-informed investor
With a regular investment plan, you simply have to define your investor’s profile, choose the most suitable product(s) for you and decide how much to deposit on a regular basis. You can do it with the help of your banker or your financial advisor. Beware of dubious advice provided on social media!
You are not influenced by your emotions
The most common mistake investors make, both novice and experienced investors, is to allow their emotions to control their investment decisions. When prices are falling and economic news are gloomy, few are those who can manage their anxiety in order to avoid panic selling. And when the prices are rising, it is not always easy to control your euphoria which can lead you to take unreasonable risks.
You benefit from great flexibility
Regular investment plans are flexible. If you have to face an unexpected expense or, on the contrary, if you receive a large sum of money, you can stop, reduce or increase the amount of your regular payments.
Regular investment may be an interesting option, especially now that interests on savings accounts are at an historic low. However, don’t forget the basic principles of prudence: don’t rush into an investment plan before looking at it from all sides and having gathered as much information as possible from your financial institution.
This is an extract from an article published in the ING blog ing.lu/mymoney.