Next time you find yourself hanging around a pool, check out the different ways swimmers take “the plunge.”
Some are so keen they’ll jump in without hesitation. They’re “all-in” no matter what the temperature. Cannonball! (Yes, we’re yelling that on the inside...go ahead, we know you want to!)
Others choose to take things slower. Maybe they’ll dip in a toe, then an ankle and a knee. At some point they’ll be all in, too – it just takes a little longer.
So just what does this have to do with investing? Approaches can be pretty similar, actually. Some investors choose the cannonball approach, others are toe-dippers. But in the end, they’ve all taken “the plunge.” Let’s, ahem, dive in to break it down a bit.
Say you’ve got a chunk of savings and you want to invest it all at once. You’re not concerned with timing your jump into the market perfectly; you’re comfortable being “all in” from the get-go. It’s better known as a “lump-sum” approach, but we like to call it Cannonball-style.
Now say you’ve got that same amount of money to invest – $5,000, for example – but you’re not ready to put all of your money into the market at once. What option do you have? Welcome to the “toe-dip” approach.
In our $5,000 example, you might be comfortable with an initial investment of $1,000. No problem. You can start there, and then set up a monthly plan to have the rest invested in equal amounts. The remaining $4,000 could be divided into 12 equal amounts of around $333 a month. At the end of the year, you’ll have invested your full $5,000.
You can find many opinions that one approach is better than another, but in the end, it’s all about what you’re comfortable with. Take the plunge in a way that feels right for you. Really, both accomplish the most important part of investing: getting started. RBC InvestEase can help you enjoy the water no matter what your style.