Living a healthy lifestyle requires dedication and perseverance. Whether it’s committing to regular exercise, eating nutritious meals, or making smart financial choices, the results of these habits may not always be immediately apparent. However, there is a simple and effective hack that can make saving money easier: setting up recurring deposits.
By automating your savings and investing a set amount of money on a regular basis, you can take advantage of a strategy known as dollar cost averaging. This not only requires less willpower from you but can also lead to better returns over time. In fact, our data shows that customers who used recurring deposits earned 6% higher annual returns compared to those who didn’t.
There are three key reasons why these customers fared better:
- Automatic Savings: When something is set to happen automatically, it’s more likely to happen consistently. Recurring deposits make it easier to maintain a saving streak without the need for constant effort.
- Dollar Cost Averaging: By investing a fixed amount regularly, you benefit from buying more shares when prices are low and fewer shares when prices are high, ultimately smoothing out market fluctuations.
- Portfolio Balancing: Regular deposits help keep your investment portfolio balanced without the need to sell assets and incur capital gains taxes.
It’s important to note that while dollar cost averaging can be beneficial for regular savings, it may not be the best approach if you have a lump sum of money ready to invest. In such cases, making a lump sum deposit could be more advantageous.
Fortunately, you don’t have to choose between dollar cost averaging and lump sum investing. Many savers opt to do both by budgeting recurring deposits into their regular finances and making lump sum investments when additional funds become available.
By combining these strategies, you can potentially maximize your returns and achieve your financial goals more efficiently. So why not give it a try and see how it impacts your financial future?