Investing Monthly: Why Is It Important?

You might think that investing requires a huge sum, and you're waiting for that moment to win a lottery so that you would finally be able to invest. This is one of the many investment myths that exist out there. If you have a steady source of income, you have the opportunity to invest on a monthly basis with even as little as €50 monthly. I know - It doesn't sound flashy. But in the long term, it can work wonders! 📈




By investing a small sum with every pay check, you can have peace of mind that; 1. You're saving up for the future and 2. You know that you cannot spend that 50 Euros because it's no longer in your savings account! Furthermore, when you invest on a monthly basis, you will benefit from a crucial concept in investments called Dollar-Cost averaging. Sounds complicated - but it's actually very simple. Let me show you by using a quick scenario!

You set up a monthly investment plan of 50 Euros per month in an equity fund. 

You invest your initial 50 Euros when the fund is priced at 1 Euro per unit. So, you buy 50 units (50/1 = 50 units purchased. 

All of a sudden, an external factor causes a temporary crash in the stock market, causing a decrease in the value of the fund to Eur0.80 per unit.

Your second 50 Euros is invested at this new price. So, 50/0.8 = 62.50 Units purchased. 

The market then recovers, and the fund is priced back at 1 Euro per unit. What is your investment worth now? 

You add the units (50 + 62.50 = 112.50 Units) divided by the price of 1 Euro. Your investment is now worth 112.50 Euros.


This is the magic of dollar cost averaging. Had you simply invested Eur100 at the price of 1 Euro per unit, you would still have Eur100 by the end of the above scenario. But, by investing monthly and hence cost averaging, you now have Eur112.50. 

Consequently, market crashes heavily favor those who invest on a monthly basis - since more units would be purchased! In my next post, I will go into more details regarding the different factors that cause stock and bond prices to fluctuate.









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