From Little Things Big Things Grow

BY: PETER KELLY

 

Professional Investment Services

With the state of investment markets being what they are, investing more of our money now is perhaps one of the furthest things from our minds.

 

Many of us have heard stories about the benefits of dollar cost averaging and compound interest. That is, building wealth for the long-term by investing small amounts on a regular basis. Of course, it was Albert Einstein who is attributed with having said “the most powerful force in the universe is compound interest”.

 

I was recently reminded of a story of a successful accounting practice that had a large number of individual clients for whom they prepared annual tax returns. Rather than simply preparing tax returns, the principals of the firm decided they would turn their tax clients into investors.

 

When a client came into the office to have their tax return prepared, when clients received a tax refund, and when new clients visited the office for an interview, they were reminded of the benefits that could be achieved by establishing a regular investment plan. In fact, clients could establish a regular investment plan with as little as $25 per week (two pizzas, garlic bread, and a bottle of soft drink). Clients could increase their monthly commitment at any time, or could reduce it if circumstances changed. They were not locked into a contractual arrangement.

 

Over time, many clients of the accounting practice participated in this program with quite a number increasing their regular savings commitment when they received a salary rise or a tax cut. The regular savings were channelled into a well managed diversified investment fund that gave exposure to a range of asset classes including cash, fixed interest securities, property and shares.

This simple strategy gave clients access to two of the great investment principles, dollar cost averaging and compound interest.

 

One of the advantages of a regular investment program is that once we set up an automatic facility to divert a regular amount from our bank account or salary, we adjust our spending habits accordingly and, after a couple of weeks, we don’t miss the amount being saved.

The benefit of a regular investment program is that you don’t need to have a large amount of money to start. A number of fund managers have plans available that can be commenced with as little as $1,000 and regular contributions of $100 per month.

Speak to your financial adviser today about starting a regular investment plan. With markets being in a depressed state, the opportunity to get in “on the ground floor” has never been better.