Making regular investments | Vanguard (2024)

FAQs

Making regular investments | Vanguard? ›

Investing on a regular basis rather than trying to time a lump sum investment can help you become a more disciplined investor, and it removes the worry that you're putting your money into the market at just the wrong time. You invest every month regardless of whether the price is high or low.

Investing on a regular basis rather than trying to time a lump sum investment can help you become a more disciplined investor, and it removes the worry that you're putting your money into the market at just the wrong time. You invest every month regardless of whether the price is high or low.

Steady growth. Investing in regular instalments can provide some protection if the market suddenly drops. A monthly investment will buy fewer shares or fund units when markets rise and more shares or units when markets fall. In falling markets, that means you can buy more shares at a cheaper price.

Dollar cost averaging is the practice of investing a fixed dollar amount on a regular basis, regardless of the share price. It's a good way to develop a disciplined investing habit, be more efficient in how you invest and potentially lower your stress level—as well as your costs. Let's say you invest $100 every month.

Invest $100 a week

This can work very well for young investors or those on tight budgets who can only manage to invest a small amount, even if it's $1,000 a year. Most brokers typically require investors to invest a minimum of $500.

In fact, a recent study by Northwestern Mutual found that the average American has $89,300 saved for retirement. In our example, investing $50 a month over 40 years leaves you with about three times that amount. It's also worth noting that investing $50 a month means parting with $600 a year.

Money market accounts, certificates of deposit, cash management accounts and high yield savings accounts all carry FDIC insurance. Treasury bills, notes and bonds are backed by the U.S. government, making them another low-risk investment option.

What are the safest types of investments? U.S. Treasury securities, money market mutual funds and high-yield savings accounts are considered by most experts to be the safest types of investments available.

How to invest $100 a week? ›

Over shorter timeframes, it tends to make little difference whether you invest a lump sum or split it into regular amounts. In a given year, for instance, it is much closer to 50/50 whether a lump sum at the start works out better than splitting it up over the twelve months.

If you get paid every 2 weeks and want to invest some of it, you will (on average) get a better return investing it as soon as you get it, vs waiting. (So if you have $100 to invest, you'll make more on average by putting it all in at once than by investing it over 7 days.

Advantages of Lump Sum Investing

Megan Finlay and Josef Zorn, strategists for Vanguard's Enterprise Advice Group, found that lump sum investing outperformed dollar-cost averaging 68% of the time between 1976 and 2022. During those years, dollar-cost averaging did produce higher returns than simply holding cash, though.

(So if you have $100 to invest, you'll make more on average by putting it all in at once than by investing it over 7 days. Or than by saving the $100 you want to invest from each paycheck for 6 months, and then investing all $1200 at once. Just invest it as soon as you get it.)

Although that percentage can vary depending on your income, savings, and debts. “Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine.

Over short timeframes, it tends to make less difference whether you invest a lump sum or split it into regular amounts, but as time goes on the benefits of putting money to work at the earliest opportunity tends to have more of an effect.