Stop Waiting for the Perfect Entry
People need to automate their investments.
Automation protects investors from their own procrastination, fear, and hesitation.
When people must actively choose to transfer money into an investment account, they find excuses to skip it.
They claim the market looks too high, there is nothing worth buying, and maybe I skip it this month. Let me wait for stocks to get cheaper.
“Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
Peter Lynch
The problem is that nobody knows what the market will do tomorrow, next month, or next year, especially the experts.
By automating your investments, you can bypass these behavioral roadblocks. This is exactly what dollar-cost averaging is for.
Under this method, you would invest a fixed amount of money, let’s say 15% of your salary every month. You would do this at regular intervals, regardless of whether the market goes up or down.
When prices are high, the fixed monthly dollar amount buys fewer shares.
However, when prices drop 10%, the same dollar amount buys more shares.
This way, over long periods of time, your average purchase price will be lower than if you had tried to time the market.
This is because nobody can time the market perfectly. It is highly unlikely that you will find the bottom. It is more likely that you will miss significant upswings and buy in later at a higher average price.
Build discipline by investing on a schedule.
Set up automatic transfers to your investment accounts on your salary day.
Pick a % that you are comfortable investing after taking into account your bills, let’s say 10-20% of your salary.
Find 5 stocks that you have researched and understand the business, growth prospects, and valuation. If your investment app allows it, set up automatic purchases of these 5 stocks each month, splitting the money equally.
Reevaluate your stocks regularly.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
