REGARDLESS of the global economic situation, there is the opportunity for the average working adult to systematically plan for the future. It was motivational speaker Les Brown who said, “There is no secret to success; there is a system to success.”

But how can adult workers (age 25 to 64) save consistently during these harsh economic times to counter high inflation and plan for their retirement?

There is a proven method that investors have successfully employed as an investment strategy to grow their money and create financial freedom and wealth. It’s called dollar cost averaging. How does it work? Investors systematically invest a fixed amount of their income in purchasing stocks or investing in mutual funds every month or regularly, regardless of their salaries, the price of the stock, or the state of the economy. Dollar cost averaging benefits the new investor as well as the seasoned investor. The practice of dollar cost averaging lowers the cost of buying shares over time.

Oftentimes people are reluctant to invest, waiting to accumulate a lump sum to start their investment journey, but time is costly. Always begin with what you can afford, make regular contributions and allow time and compound interest to work wonders for you. BPM Financial Limited has seen many clients adopting this approach and has seen their funds grow tremendously in the long term. There is the example of one of my clients who started her account at the onset of the 2007-2008 global financial crisis.

In 2007, she started a salary deduction contribution of $1,000 monthly and when her salary increased, a new salary deduction was done for $2,500 monthly.

Occasionally ad-hoc deposits were made. Between 2007 and 2020 this client saved over $450,000. She retired in 2020. With the cessation of the salary deductions and now earning a pension, no further contributions were made to this account. Amid the current global crisis of 2022, the client had twice the amount of money she invested while working. The important point to note is that at a time when the fund value in her account declined due to the downturn in the stock market, this client was able to reap the fruits of investing in a balanced fund of stock and bonds for 15 years. She sowed in one financial crisis and reaped in another. With a de-risk strategy employed, the client now has sufficient funds withdrawn to provide monthly income that will supplement her pension income. De-risk is an investment strategy that removes risk from an investment. The client took advantage of the opportunity in the crisis to rebalance her investments.

Dollar cost averaging is recommended for a bear market (when stock markets are down). Buy shares at low prices today and soar ahead in the future when stock prices rise. Long-term investors should stay invested during times of decline.

Emotions play a major role in making financial decisions. Oftentimes, when markets are volatile active investors panick and abandon their long-term goals, reacting based on emotions rather than responding with logic.

In the book The Psychology of Money, author Morgan Housel said, “Money has little to do with how smart you are and a lot to do with how you behave, and behaviour is hard to teach, even to really smart people.” Morgan Housel referred to billionaire Warren Buffet, who started investing in the stock market consistently from age 10 and never panicked. He didn’t quit but remained invested in the stock market through 14 recessions.

Dollar cost averaging will allow compound interest to work wonders for the investors who demonstrate patience, persistence, and perseverance. The practice of investing fixed amounts regularly works best for investors with small amounts to invest and those who are afraid of investing during market declines. Investors should avoid constantly watching their investment portfolio. The adage, “A watched pot never boils,” remains true with investing in the stock market, especially in times of stock market instability. With dollar cost averaging, small sums add up. Whatever your income, it’s never about the amount of money you make; growing wealth is based on how much you keep and how many generations you keep it for.

Grace G McLean is financial advisor at BPM Financial Limited. Contact her at gmclean@bpmfinancial and visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com