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Money sitting in savings? Now what?

October 7, 2022

Written by Dale Roberts

Key takeaways

  • Consider investing some money now, then invest the rest over time, on a regular schedule.

  • You might start by investing enough so that if markets go up you can participate in a meaningful way.

  • Use dollar-cost averaging to take emotion and worry out of the investing process.

Money sitting in savings? Now what?

When I was an advisor, it was one of the most common questions I was asked.

"I've saved a big pile of money, and now I'd like to get into investing, what can I do?"

A savings account is a staple and a good place if your risk tolerance is low, but maybe now you feel like it's time to invest it for greater potential long-term returns?

You might have hesitated to put money in investments for many reasons. Maybe it's a fear of market volatility? If you're considering investing for the first time, or looking at getting back into it after a long time away, here are some tips.

Managing the emotional risks 

Here's a simple investment strategy that can take advantage of rising markets over time and help you manage the emotional risks of investing.

1. Consider splitting your available money in 2 pots

  • Invest some now. You can take advantage of potentially rising markets.
  • Invest the rest later over time, on a regular schedule. You can take advantage of falling markets and lower prices if that happens.

2. How much should you invest?

You might start by investing enough so that if markets go up you can participate in a meaningful way. And the how much question is certainly very personal. It's up to you to determine your comfort level for exposing money to market risk.

The key is to get started.

You might invest 10%, 20%, perhaps even up to 50% or more of the available money sitting in savings. Again, it comes back to your comfort level.

3. Start investing on a regular schedule

This is one of the most simple and beautiful investment strategies: dollar-cost averaging. The idea is to take emotion and worry out of the investing process.

The remaining funds might be invested every two weeks or every month over an 18-month or 2-year period. That might give you enough time to move through a market correction and scoop up those shares and units as they go on sale.

If the markets go up and don't correct over time? No sweat. You got in, got invested, made money and added more money as the markets went up. That feels good too.

When it comes to investing, keep it simple. Keep it low cost.

Follow a simple strategy within your comfort level. And as always, keep your investment fees low if you can.

The key to getting back into investing after a long time away, or anytime you decide to invest, is to not guess about where markets might go. Remove the guesswork, invest in a way that's comfortable for you, and put that hard-earned money to work.

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