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The Power of Systematic Investing
By Neal Brandon, CFA, Senior Investment Strategist, TD Wealth
Successfully navigating the investment landscape requires a disciplined approach to achieving your financial goals. One way to help simplify the process, while remaining focused on your long-term goals, is through systematic investing. This strategy includes regular contributions to your investment account, providing a more structured approach to investing that can help manage market fluctuations and investor emotions over time.
What is Systematic Investing?
Systematic investing involves setting up regular, automated contributions into your investment account. This disciplined approach eliminates the guesswork and emotional decision-making often associated with attempting to time the market. By investing at set intervals, you can take advantage of dollar-cost averaging, a strategy that can help to reduce the risk of making large lump-sum investments during unfavorable market conditions, potentially compromising your long-term financial goals.
Key Benefits to Systematic Investing
- Consistency in Investing: By contributing a fixed amount at regular intervals, you reduce the temptation to time the market, which can be difficult even for seasoned investors. This can help mitigate the impact of market volatility.
- Convenience and Automation: Automating your contributions simplifies the investment process, ensuring you stay committed to your long-term strategy.
- Personalization: You control the amount and frequency of your contributions, allowing you to tailor your investment plan according to your financial goals and cash flow.
Systematic Investing in Action
To illustrate the potential benefits of systematic investing, consider a hypothetical example: An investor who contributes $1,000 each month into an account tracking the S&P 500 Price Index over a ten-year period. While past performance does not guarantee future results, this approach can demonstrate how regular investing, even during market downturns, can help grow wealth over time.
Source: FactSet, TD Wealth Chief Investment Office as of January 1, 2015 – December 31 2024. Returns based on the S&P 500 Price Index. Monthly DCA involves an investment of $1,000 each month over a 10-year period ending December 31, 2024. Monthly contribution assumes the contribution is fully invested on the first business day of each month. The volatility and performance of the indices may be greater than or less than the volatility and performance of actual investments. Indices reflect the direct investment. Past performance is not indicative of future results. See Important Information about TD Wealth® Investment Strategies.
Hypothetical Illustration: This scenario assumes money is deposited/contributed on the first day of each month with returns based on the S&P 500 Price Index. Indices do not reflect taxes, fees, expenses or inflation. Your own account may earn more or less than this example and income taxes will be due when you withdraw from your account. Investing in this manner does not ensure a profit or guarantee against a loss in declining markets. Past performance is no guarantee of future results.
How to Get Started
A financial plan aligned with your goals is a great starting point for systematic investing. Once you determine how much you want to invest, setting up recurring contributions is simple. You can do this with the guidance of a TD Wealth Financial Advisor