For many Canadians, finding extra cash to store away can be a very difficult thing to do, at any time of year. Investing on a regular basis, or “dollar-cost averaging,” is one strategy employed by many, and one which I have talked to previously.
Investing in lump sums (such as during tax refund season) is another strategy which has (surprisingly) proved to be a savings strategy which is just as good, over the long term, as investing small sums throughout the year.
For those who receive a meaningful tax refund each year, considering the possibilities with respect to spending such a refund can be very tempting. With debt loads approximating all-time highs for Canadians, paying down debt may be another focal point for those who may be constrained in their ability to invest.
Investing even a portion of one’s refund each and every year over time, however, can produce incredible results for those who buy into companies with durable competitive advantages and hold them long-term.
The amount of money one invests may not be as important as the patience with which a person leaves his or her money sitting on the sidelines; with a well-diversified portfolio, much of the idiosyncratic risk (risk related to individual companies) can be limited, while an investor can re-balance every few years to maximize a long-term investing strategy.
Picking a time to start investing is often the hardest part of the investment process; however, now is as good a time as any.
Invest wisely, my friends.
