Systematic Investing Could Yield Greater Returns
Investing isn't a set it-and-forget it process. The first step in the process for you may be setting up an account and making the initial investment, but it certainly does not stop there. What you should do is give some thought into how much you can set aside and still live a comfortable life, but definitely do not simply stop at the initial investment. Consider starting a systematic method of investing your money on a routine basis such as payroll deductions.
There are numerous options to systematically invest money without having the opportunity to use it first. In other words- you will save yourself from temptations of taking your husband or wife for a night on the town with your otherwise intended investment dollars. You could do this with an automatic payroll deduction, for example. Part of each paycheck could be automatically deposited into your brokerage account, whether it be a full-service brokerage or a discount brokerage such as Scottrade, to be used for future investments. You could also set up an automatic EFT (Electronic Funds Transfer) with your banking institution, which will automatically take a predefined amount of money from your checking or savings account and deposit it into your brokerage account.
In both cases you will define the amount of money- you may even start with 5 or 10% of your earnings. By setting a defined percentage, the more you earn, the more you invest. You could also state an amount such as $100 or $500 a month or quarter. Just think of this as a necessity and figure it into your budget- saving for retirement is just as important as going on vacation next summer.
There are many great reasons for systematic investing. One reason is considering the concept of dollar cost averaging. Don't cringe at this term; it simply means investing on a regular basis with a predefined amount of money (i.e. $100 a month, $500 a quarter, etc). The result of dollar cost averaging is that you will buy more shares when prices are lower and fewer when prices are higher. This essentially evens out the highs and lows of an investments price.
Simply by using the concept of dollar cost averaging will not guarantee gains or protection from losses, but it can definitely help by buying more shares at lower prices and fewer shares at higher prices. This is a great way of riding the ups and downs of the market and will help to keep your "down market" emotions in check. This will help to keep your investment plan on track.
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