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#18 Why regular investments pay off

20.02.2024
Felix Niederer

Why regular investing not only makes many things easier, but also often leads to better results. In this article, we highlight the advantages of regular investing and how you can automatically benefit from market corrections.

The benefits of regular investing

Some people are masters of organization. They do everything immediately, create to-do lists and set reminders in their calendar. For others, it helps if they arrange to meet up with friends, for example, to achieve their sporting goals.

Regardless of what goals you are pursuing, it is helpful to build in a reminder mechanism, because only through regularity can you achieve your goals in the long term. Similar to sporting goals, regular investing helps you to achieve long-term financial goals.

If you earn more than you spend, you can either simply leave the extra money in your account or invest it. Leaving your money in your account is known to lead to a decrease in the value of your assets, as experience has shown that the average annual inflation rate usually beats the annual interest rate on savings at your bank. By way of illustration: In 2023, inflation was 2.1% while the average interest rate on savings accounts for adults was just 0.8% at the end of 2023.

Of course, it is more convenient not to have to worry about your finances, but in the long term you are accepting a loss in the value of your assets and therefore benefiting less from your savings. The alternative: invest the additional monthly amount directly. By investing regularly, you automatically benefit from market corrections and optimize your investment horizon.

Automatically benefiting from market corrections and dispensing with market timing

Why do you automatically benefit from market corrections if you invest regularly? Markets are volatile and always will be. After a market slump, existing investments are naturally worth less. However, future payments will give you more shares in the stocks and therefore in the companies — and at the same price. This also leads to a higher participation in future dividends.

Another advantage of regular investing is that you don't have to worry about whether it's the right time to invest. There is no need to constantly monitor the market and wait for the best time. At the same time, you avoid the annoyance of stock markets rising contrary to expectations. In short: if you invest regularly, you don't have to worry about the right “market timing”, which also simplifies the process.

Practical ways to invest regularly

What is the easiest way to invest regularly? If you have a similar amount left over in your salary account each month, there are two options. The first option is to use an ETF savings plan. Alternatively, a standing order can be set up in e-banking with professional asset management. For True Wealth users, it is even possible to use the IBAN already in use for the standing order without incurring additional investment costs.

There is a practical reminder function for those who do not wish to set up a standing order or who have an irregular amount left over. This allows you to set the frequency of deposits and True Wealth will review the deposits to send a reminder when needed, ensuring no opportunity to invest is missed.

What type of investor are you? Team “standing order” or do you prefer reminders? Share your thoughts with me via email.

Whether you opt for the automatic route of a savings plan or prefer to benefit from reminders, the important thing is that you are actively investing in your financial future. See you next time.

Disclaimer: We have taken great care with the content of this article. Nevertheless, we cannot exclude the possibility of errors. The validity of the content is limited to the time of publication.

About the author

author
Felix Niederer

Founder and CEO of True Wealth. After graduating from the Swiss Federal Institute of Technology (ETH) as a physicist, Felix first spent several years in Swiss industry and then four years with a major reinsurance company in portfolio management and risk modeling.

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