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.
Which Style is Best?
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 (article: If There’s One Thing to Know About Investing, It’s This ) . RBC InvestEase can help you enjoy the water no matter what your style.