STEP
7  
Vastly improve your performance, peace of mind,
and odds of success by automating your
investments:
- Set up automatic contributions
for the maximum amount you can afford—always
it's more than you think you can
afford—twice a month
- By investing a fixed amount
two times a month, you harness the power of dollar-cost averaging, automatically buying more shares
when the price is low, fewer shares when the
price is high, lowering the average dollar cost
of each purchase
- Automatic investing avoids
emotion-driven investment decisions, preventing
your overbuying when the market is inflated or
underbuying when the market is underpriced
NEXT
STEP
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The more your fund behaves
like a roller coaster, the more you benefit from
automating your investments: even in this relatively weak
example of dollar-cost averaging shows how just $100,
invested just once a month over just 10 years in a stable
large-cap index fund, nevertheless grew, despite the bear
market of 2000-2002, to $15,683—a 31% return
| "You have
a busy life. You don't have time to sit down
every few weeks and figure out how to save and to
whom to send the checks. For your investment
process to succeed, you need a system that
doesn't depend on your writing checks every
month. The process has to be automatic." - David Bach, The Automatic
Millionaire
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