Article by J.J. Montanaro, USAA
A lot can scare us in life. I vividly remember frantically searching the neighborhood years ago after my toddler son wandered away from the babysitter. And I can still recall the dry mouth and desperate beating of my heart as my wife and I waited in the hospital while our daughter was undergoing surgery.
You’ve no doubt experienced your own anxiety-filled moments-the situations that bring that horrible emptiness to the pit of your stomach.
There’s another less-serious issue out there that also strikes fear into the hearts of many: investing. It shouldn’t be so emotionally charged. And yet, I regularly hear from folks who are filled with trepidation at the mere thought of it.
So, in a financial planner’s attempt to be a healer, here’s one great way I suggest to get over your fears: Invest systematically. Here are four reasons to consider systematic saving and investing:
It’s Easy.
Whether you’re signing up to contribute to a 401(k) plan, signing up for the Thrift Savings Plan in the military, or setting up automatic investments into an individual retirement account, it typically requires only a few keystrokes or a simple form or two to get the ball rolling. Our legal team doesn’t let me make a lot of guarantees, but I’d bet you’re less than 15 minutes away from getting started. Now that’s not very scary at all.
It’s All-Purpose.
Sure, I love the idea of building your retirement nest egg or funding the kids’ college through systematic investing. But there’s also systematic saving, and it can be a great way to accumulate cash for your emergency fund, holiday shopping or next year’s vacation. Whether it’s long-term investing or short-term saving, doing it systematically is truly all-purpose. And getting the job done will leave you feeling warm and fuzzy, rather than frazzled.
It Takes Timing Out of the Equation.
“Is now a good time to invest?” I hear that question frequently from those looking for an insight gleaned from the crystal ball that I don’t have. What I do know is that by investing a little chunk each paycheck (or each month), and not letting what’s happening (or not happening) in the market dictate your behavior, can be a calming approach to investing.
It can Leverage Time.
The “time value of money” is a complicated way to say that earning interest on your interest (or compounding interest) is a powerful ally to have on your side. But that’s only the case if you get started sooner, rather than later. And now, for the requisite “oooh-aaah” moment: $100 per biweekly paycheck growing at a hypothetical 6% will be $431,476 in 40 years. Now that could put a smile on your face.
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