Beginnings: School and New Money

Remember the jitters and joys of your first day at school? Well, guess what? Entering the financial markets with new money can feel eerily similar. Whether you've just sold a property, business, or have been stashing cash under the mattress, this newsletter is for you.

The Emotions of Classrooms and Investing

1️⃣ Fear Factor: Just like stepping into a new classroom filled with unfamiliar faces can be nerve-wracking, so can putting your hard-earned money into the market. The fear of loss, making a wrong move, or simply not understanding market dynamics can be overwhelming.

2️⃣ Excitement: The first day of school is also filled with excitement about new opportunities—new friends, new subjects, and new experiences. Similarly, entering the market opens up a world of possibilities for financial growth and greater options. 

The ABCs of Market Entry

🅰️ Immediate Investment: Historical data dating back to the 1920s shows that an immediate lump-sum investment into a diversified mix of stocks outperforms a systematic, dollar cost average approach about 68% of the time.  

🅱️ Systematic Investment (Dollar Cost Averaging): Purchases are spread out over time. For example, you invest 1/12th of your total new money each month for a year. While the numbers favor immediate investment, your personal risk appetite, life phase, and future cash flow are all reasons to consider DCA. 

The Long Game

Similar to how the first day of school marks the beginning of an academic year, your initial investment of new money in the market can serve as the starting point for growing or preserving wealth. There will be ups and downs. However, with a 5+ year horizon, markets have tended to be positive 90% of the time. 

V23236045