Photo courtesy of Liz Knueven
- I used to treat investing almost like it was a game, using an app to buy things that interested me.
- But, I soon realized that my balance wasn’t growing. I changed methods to be more consistent.
- A dollar-cost averaging strategy and automatic deposits helped my new account double my old one.
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I started investing through an app. But, I wasn’t doing it right.
I wasn’t consistent with it, and I was manually picking and choosing what I bought, which took a lot of time to manage. I thought actively managing an account was the allure of investing, but that strategy was actually holding me back.
About a year later, I opened a different account. Seeing that I hadn’t made much progress with the first account – and that it was taking up lots of time – I opted for a fully automated approach. My second account was with a robo-advisor, which chose where my money would be invested automatically. I set up an automatic deposit to keep money going in consistently. Then, I forgot about it.
I didn’t realize my first method had me making two mistakes until my new, second investing account doubled in value compared to the first, earning me thousands.
I wasn’t using automatic deposits the right way
When I was actively managing my investment account, I did have a small automatic deposit turned on. But, it didn’t do anything on its own except move the money – anything I put in would sit in the account not growing until I actively went into the app and chose where to invest it.
That meant the money would sit for weeks if I forgot or didn’t have time to manage it. It meant that I would open up the app, see red, and think that it wasn’t the right time to invest anyways. Or, in extreme weeks, I’d cancel the automatic deposit altogether.
What I didn’t understand until I opened my automated account was just how powerful these deposits could be when made consistently. Not only were automatic deposits saving me time, but they also saved me the potential problem of looking at how the market was doing.
When I started fresh with an account that used automatic deposits the right way, putting the money in the market right away, I saw my total balance grow in a way I never did before.
I wasn’t using a dollar-cost averaging strategy
When I was picking stocks in the app, I would open the app and close it because it didn’t seem like a good day to be investing: the prices could be too high, or the red or green line seeming too volatile. Something was always encouraging me to either wait it out or buy on impulse at that moment.
When I opened my next account, I wanted to avoid that. I went for the expert-favorite dollar-cost averaging strategy instead.
This strategy is simple: consistently invest the same amount every week or month, instead of trying to time your deposit to get the best price. The principle behind this is that shares are sometimes bought high, and sometimes low, but it all evens out in the end.
The robo-advisor account put the money that I automatically deposited to work right away. It’s not only saved me a lot of time, but it also helped to kickstart my account’s growth. It suddenly didn’t matter whether prices were low or what was going on in the market – my balance was growing.
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