How To Automate Investing to Build Long-Term Wealth
In a Nutshell
Market timing is nearly impossible because over 50% of S&P 500 returns over two decades came from just 10 days, seven of which occurred within two weeks of major downturns. Automated investing through dollar-cost averaging removes emotion and ensures consistent participation by setting up recurring contributions to low-cost ETFs like IVV that track the S&P 500. Fractional shares make this accessible with as little as $1, allowing compounding to work over time regardless of market conditions.
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Over the last two decades, a significant portion of the growth in the S&P 500 has come from just 10 single days. The question is whether those 10 days contributed about 10%, about 25%, or nearly 50% of the total return. The correct answer is nearly 50% - those 10 single investing days contributed over 50% of the S&P 500's return over the last two decades.
Seven of those 10 great days came within two weeks of the worst days during the same period. This means that investors who were panic selling their investments or trying to figure out when to buy the dip might have missed out on those gains entirely.
The best way to make sure you're there for those great days is to simply be in the market. We can't fully predict the weather, and if you want the growth that comes from rain and sunshine, you have to have your seeds planted. This is where automated investing comes in.
When you open a brokerage account and set up contributions to happen automatically, you're taking the emotion out of investing and removing the human instinct to try and chase the ups and downs of the market.
This investment strategy is called dollar-cost averaging - investing the same amount of money on a consistent schedule, whether the market is up, down, or somewhere in the middle. The goal is to mitigate the impact of market volatility and reduce the average cost per share over time. With dollar-cost averaging, you're committing to spreading your investments across many moments in time, rather than reacting to headlines, trying to pick the perfect moment, or simply forgetting.
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