This article was first published on StashAway. Start investing in an intelligent, personalised portfolio with StashAway in just 15 minutes.

Open an account
with StashAway

Investing shouldn’t be stressful. In fact, it should be simple and empowering. Setting up a monthly investment plan can help you achieve your long-term financial goals because it minimises risk and imposes discipline in your finances. Who wouldn’t want that?

First, set a goal

It sounds trivial, but setting goals that you want to achieve later on in life will make adjusting your spending and budget much easier because you’ll know that you’re cutting back on a few things to make sure you can start a business or retire the way you want to.

Then, be disciplined in your spending

Make a budget based off of your monthly salary that includes investing 10-20% of your income towards the goals you’ve set.

Not having as much to spend may feel like a hassle at first if it forces you to adjust your daily lifestyle. But by investing more and spending less, you’re taking an active role in building the life you want later on.

Can’t find a way to put aside money to invest? Skipping out on that second cup of coffee each day can give you an extra $100 to invest each month.

Setting aside a certain amount each month to be invested will automatically force you to be more disciplined in your spending.

Mitigate your investment risk

Now that your monthly budget includes a portion to go towards investing, it’s time to start investing for your long-term goals.

A monthly investment plan is an easy way to use dollar-cost averaging to your advantage. Dollar-cost averaging is an investment strategy that passive investors are increasingly talking about.

The action behind dollar-cost averaging is investing consistently (think: every week, every month, or every quarter) versus saving up a large amount of money to invest occasionally and exposing it to market conditions.

The theory, and proof, behind investing consistently over the long term is that when you invest monthly for an extended period of time, sometimes you’ll buy when the market is up, and other times when the market is down.

This normal fluctuation in the market averages to an upward trend. If you look at long-term market trends, there certainly is short-term volatility, but in the long-term, the market trends upwards, meaning, your long-term investments trend upwards, too.

So, instead of saving up to make one big investment, invest monthly to average into the market and minimise your risk over the long term.

Be disciplined in your investing

Your budget includes a portion to invest, and you understand that you should invest each month, regardless of whether the market is up or down.

But that can be easier said than done. Setting up a standing instruction and sticking to an investment plan for the long term pays off. Literally.

A monthly investment of $500 SGD per month (that’s equivalent to $16 SGD per day) can build your wealth to $300,000 SGD in 25 years if you were to invest $500 monthly in a portfolio that earns 5% in returns.

If you were to invest an additional $100 SGD each month in a portfolio that earns you 5% for 25 years, your wealth would increase to $60,000 SGD, versus $30,000 SGD if you were to keep that monthly $100 in cash.

That’s future wealth that enables you to save towards your general savings or towards any of life’s larger expenses, such as retirement or a new home. Think how good it will feel to have that financial flexibility.

With a standing instruction, you don’t have to worry about remembering to invest. You should feel free to check how your investments are growing, but if you do check, remember-- the market isn’t “up” every single day.

But, if you’re investing each month for the long term, you’ll be “up” in the long term.

Take control of your financial future

If you haven’t started investing monthly to reach one of your goals, start now. And if you already are investing monthly, look at your expenditures to see how you can invest a little bit more each month.

A little bit more each month adds up, even if you don’t have a specific goal in mind.

So when you’re ready for that big purchase or life event, your money is ready, too.

Open an account
with StashAway

GoBear team

Brought to you by GoBear Insurance Broker (SG) Pte. Ltd., a registered insurance broker with the Monetary Authority of Singapore