With compound growth, dollar-cost averaging and potential tax savings, a regular investment plan is a powerful strategy.
When it comes to reaching your goals, one of the most effective strategies you can use is also one of the easiest and most convenient: investing regularly. A regular investment plan is a savings commitment that invests a fixed-dollar amount at specified time periods. You can set up your plan according to the schedule that best meets your needs - weekly, bi-weekly, or monthly.
If you don't already have a regular investment plan, now is the time to start. If you do have one, make sure you're contributing as much as you can. You'll enjoy a number of important benefits that can enhance your short and long-term results.
Compound growth. With a regular investment plan, your money starts to work for you right away, earning interest, dividends, or investment growth on a compound basis.
Dollar-cost averaging. The set dollar amount of your regular contribution buys more units when prices are low and fewer units when prices are high; over the long term, this can reduce your average cost per unit.
Reduced temptation to time the market. Many studies show that when investors try to time the market they often pay a steep price, missing the best time to buy or sell, and ending up out of the market during the biggest gains. A regular investment plan minimizes this temptation and allows you to build wealth steadily over time.
Potential tax savings. When your regular contributions are directed to a Registered Retirement Savings Plan (RRSP), you can apply to have your payroll deductions reduced at source. In other words, you reap the tax benefits of your RRSP contributions up-front, rather than having to wait until you file your income tax return after the end of the year.