3 easy ways to make your regular investments work harder
When it comes to reaching your financial goals, one of the most effective strategies to use is to simply invest regularly.
CIBC
May. 14, 2024
5-minute read
With a regular investment approach, you choose how much, how often and when to save. Investing regularly helps you stay on track to achieving success.
Once you’ve established a regular investment strategy, keep in mind that it doesn’t have to stop there. Try these 3 strategies to boost your regular investments.
1. Increase your regular savings amount
This sounds simple — if you save more, you’ll end up with more. Although this is true, there’s more to it than that. This is because of the magic of compound growth.
For example, let’s say that you’re currently taking a regular investing approach where you’re putting away $400 a month. The impact of increasing your savings amount by another $200 — to $600 a month — is a lot more than just your contributions. Over 25 years, you’ll contribute an additional $60,000, but the difference in your investment total will be much more substantial as shown in the following table.
| Regular investing details |
Saving $400 per month* |
Saving $600 per month* |
Difference |
| Your contributions |
$120,000 |
$180,000 |
$60,000 |
| Growth of your contributions |
$115,248 |
$172,873 |
$57,625 |
| Investment total |
$235,248 |
$352,873 |
$117,625 |
*Assumes a 25-year time horizon and a 5% annual rate of return.
Tip: Regular investing opportunities
- Freed-up cash flow. Have you paid off a debt, like a car payment? Or maybe you no longer need a major, ongoing expense? Consider redirecting a portion of your additional cash flow to your regular investments.
- Increase in income. Do you have a new job, or have you received a promotion at work? Congratulations! Again, redirect all or a portion of your additional cash flow to regular investments.
- Debt restructuring. Is it possible to optimize your borrowing into one loan? This provides another great opportunity to boost your regular savings.
Looking for inspiration? Find out how much your money can grow over time with regular investments with this easy-to-use tool.
2. Invest early, invest often and stay invested
When saving for a long-term goal like retirement, it’s important to start investing as early as possible. The longer the compounding, the greater the potential for accelerated growth. It’s also equally important to stay invested over the years, including during times of increased market volatility.
For example, if you contribute $400 a month in a regular investment plan over 25 years, assuming a 5% annual rate of return, your total investment value adds up to $235,248. However, the final decade will have the most impact. Even though the monthly savings are still $400 a month, there’s a total investment increase of $128,887 over those last 10 years.
| Time horizon |
Saving $400 per month* |
| 5 years |
$27,236 |
| 10 years |
$61,997 |
| 15 years |
$106,361 |
| 25 years |
$235,248 |
Tip: Regular investing hack
If you’ve established a monthly regular investment approach, consider splitting it to bi-weekly contributions instead. This can align nicely if you’re paid on a bi-weekly basis, and over the years, you’ll see an increase in your investment total.
| Regular investing details |
Saving $400 per month* |
Saving $200 bi-weekly* |
Difference |
| Investment total |
$235,248 |
$254,574 |
$19,326 |
*Assumes a 25-year time horizon and a 5% annual rate of return.
3. Optimize your investment mix
Another key component in boosting your regular investments is your annual rate of return. The following table shows that the higher your annual rate of return, the more your regular investments will grow over time.
It’s important that you’ve selected an appropriate investment mix according to your time horizon and personal risk profile. If you’re saving for a long-term goal like retirement, an investment mix with higher growth potential can be most impactful in the long term. You have the time for your regular investments to smooth out any significant market fluctuations.
However, if you’re saving for a short-term goal like a vacation, consider more conservative investments as you don’t have the time to recover from short-term losses. Your CIBC advisor can help you determine your investment strategy, regularly monitor your portfolio and rebalance your investment mix if necessary to help position you for success.
| Regular investing details |
Long-term goals |
Medium-term goals |
Short-term goals |
| Time horizon |
5 years or more — retirement, child’s post-secondary education, cottage |
2-5 years — home down payment, new roof |
Under 1 year — vacation |
| Investment considerations |
Higher growth potential investments — which means higher risk — in line with your personal risk profile |
A balanced mix of investments in line with your personal risk profile |
More conservative investments regardless of your personal risk profile |
A CIBC advisor can help guide you to the best investment solutions to help you achieve your short, medium and long-term goals. Contact us today to optimize your savings with a regular investment approach.
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