Systematic Investment: Benefits and How It Works

What can you buy with RM50 today? It might not be much because it might just be enough to buy necessities for a week, eat three meals a day, or fill up your car.

How about you invest this RM50 every month? Indeed, you feel the amount is too small and will not affect your finances.

However, do you believe that with this RM50, you may have about RM3,400 in savings if you invest every month consistently for five years in an investment instrument that gives an average return of 5% per year?

The conditions are simple: You must invest consistently every month, not skip even one month, and do not withdraw the money invested or the dividends received.

If you can do these two things within 2-3 years, you can build more significant savings and finally make whatever your dreams come true.

In fact, investing is not difficult if we do it the right way, choose the right investment instrument, and be highly disciplined about investing and not withdrawing in the long term.

One method that can assist you in disciplining yourself is to use a systematic investment facility, where you make deductions to invest automatically every month directly into the investment instrument of your choice.

Systematic investment, often facilitated through methods like Systematic Investment Plans (SIPs), offers several benefits for investors. This disciplined approach to investing involves making regular, fixed investments over time rather than investing a lump sum all at once.

One example is investment via AutoLabur @myASNB, where investors allow ASNB to make monthly deductions from the Savings Account. The money will be directly invested into ASB without any intervention from the investor.

Here are the key benefits of systematic investment

1. Disciplined Savings

Regular Investment Habit: Systematic investment encourages a regular savings habit, promoting financial discipline and long-term financial planning.

Automated Process: Investments are often automated, ensuring consistency and removing the temptation to skip investments based on market conditions.

2. Ringgit Cost Averaging

Mitigates Market Volatility: By investing a fixed amount at regular intervals, investors will automatically buy more units when prices are low and fewer units when the prices are high. This averaging effect can reduce the impact of market volatility on the overall investment.

Reduces Timing Risk: It eliminates the need to time the market perfectly, which is challenging even for experienced investors.

3. Compounding Benefits

Compounding Returns: Regular investments allow earnings to generate returns over time, leading to compounding growth. The longer the investment horizon, the greater the compounding effect.

Early Start Advantage: Starting early with systematic investments can significantly enhance the benefits of compounding, even with smaller amounts.

4. Affordability

Lower Entry Barriers: Systematic investments usually require lower initial capital, making them accessible to a broader range of investors, including those with limited funds.

Flexibility: Investors can choose to start with a small amount and gradually increase their investment as their financial situation improves.

5. Emotional Control

Reduces Emotional Bias: Regular, fixed investments reduce the emotional decision-making often triggered by market highs and lows.

Consistency in Investment: Maintains investment consistency and prevents panic selling during market downturns

6. Performance Tracking

Regular Monitoring: Systematic investments often come with tools and statements that help investors track their performance regularly.

Adjustments and Rebalancing: Investors can periodically review and adjust their investment strategy based on performance and changing financial goals.

Conclusion

Systematic investment is a powerful tool for building wealth over time with minimal risk and effort. It promotes disciplined saving, takes advantage of compounding, and reduces the emotional stress associated with market volatility.

By aligning regular investments with financial goals, individuals can create a robust financial plan that adapts to their needs and circumstances.

Highlight

1. Systematic Investment Facility helps you be disciplined to invest and build savings.

2. Avoid making deductions in large amounts; instead, set an affordable amount that is not burdensome, for example, RM100 every month

3. The power of compound interest will help grow an investment if done consistently and continuously for some time