Monthly investment plans (how to start building real wealth)

Do you get paid every month? Do you spend every month?

Well, my friend…that means you should invest every month, too.

Here’s how to use a monthly investment plan to start building your wealth.

 

Monthly investment plan

Investing is one of the most powerful ways to build wealth. Just look at Warren Buffet (perhaps the best investor of all time).

Even if you’re not Warren Buffet, a monthly investment plan helps make investing easier to manage and stick with.

Simply follow a few simple steps and set aside a portion of your income each month.

Let’s start from the top.

 

What is a monthly investment plan?

A monthly investment plan is a strategy that involves investing a set amount of money each month. The strategy usually focuses on investing in a variety of stocks, bonds, and other equities. The investment plan aims to provide regular income and growth that builds value over time.

Advantages of monthly investment plans:

• The strategy takes advantage of dollar cost averaging (or Rand cost averaging for South Africans)
• Balances capital appreciation and income generation
• Builds the habit of investing

 

 

Monthly investment tips

The best way to invest month-over-month involves following a few key principles. Start with a clear plan. How much can you afford to invest each month? And what do you want to achieve? Then, stick with it. Pay yourself first, automate the process, and review and reassess.

Here are important tips to follow:

• Start small and grow: Begin with an amount you’re comfortable with, even if it’s small. Increase how much you contribute each month as time goes on.
• Automate the investment: Set up automatic transfers from the bank to the investment account each month. Investment platforms also offer recurring purchases for things like stocks and ETFs.
• Pay yourself first: Treat your monthly investments like a bill that must be paid. The first ‘debit’ that MUST be paid. Always invest first, then start spending on other things.
• Review the budget often: Check your budget regularly to find ways to save and invest more. Small changes can make a big difference.
• Stay up-to-date: Keep up with financial news where possible. Subscribe to a newsletter or make a habit of reading a bit online.
• Stick to the plan: Focus on investing the same amount each month. Try not to skip, and don’t worry too much about buying at “the right” time. 
• Diversify what you invest in: Spread your investments across different types of assets. This will reduce the risk. It also means the portfolio will grow, even while some investments go down.
• Reinvest: If your investments pay dividends—reinvest them. It speeds things up a lot.
• Set clear goals and review them: Set specific financial goals and check them regularly. Clear goals help you stay focused and motivated.

 

Our personal favourites are:

A) Pay yourself first. Just do it. Invest before you spend; 

And B) Automate the investment. Think of investing like a bill you need to pay. This way, your investment becomes part of your budget.

⭐ Related content:

• Best tax-free investment accounts in South Africa right now

 

Some people invest as part of a savings plan. If you want to do the same, there are two short-term strategies you can follow.

 

6 months investment plan

A 6-month investment plan is usually a set plan to invest specific amounts in specific financial instruments over a period of 6 months. It could also be part of an ongoing strategy. In this case, the investor follows a set strategy for 6-months before reviewing the performance and making adjustments.

Some South Africans may follow a 6-month investment plan to save for short-term goals. Saving for things like a holiday or building up an emergency fund. Others may use it as part of an ongoing investment strategy with a shorter review period.

The best approach depends on the ultimate goal. Ask yourself, ‘Is this part of an ongoing investment or for a goal that is 6 months away?”

Best for short-term savings goals.

Approaches:

1. Use a fixed-term savings account: Secure a guaranteed interest rate on a lump sum of cash. This is a safe option that offers steady, predictable returns.
2. Invest in a money market fund: These funds are low-risk and highly liquid, providing slightly better returns than a regular savings account. While offering accessibility and flexibility.
3. Buy shares in a short-term bond fund: Invest in bonds with maturities of six months or less. These funds are generally stable and offer better returns than traditional savings options.

 

 

12 months investment plan

A 12-month investment plan is a great way to save [and invest] for medium-term goals. Saving for a new car, making a down payment on a house, or just as part of an ongoing investment strategy.

Again, 12 months could be a great period to use investing as part of a savings strategy. Especially for more expensive savings goals. Or it could be part of an annual strategy.

Best for medium-term savings goals.

Approaches:

1. Invest in a balanced unit trust: These funds mix equities, bonds, and cash to offer both growth and stability, making them ideal for a one-year horizon.
2. Buy shares in ETFs: Consider an ETF that tracks a broad market index, like the JSE Top 40 or a feeder ETF that follows the S&P 500. This approach gives you exposure to the market with the potential for higher returns over a year. This could be risky for a short-term strategy, but these investments generally perform well over several years.
3. Invest in a fixed deposit with a 12-month term: Lock in your money for a year at a fixed interest rate. This is a secure way to earn interest with minimal risk.

 

Do what works for you.

It may help for you to learn more about investing before you start. Check out: How to invest money in South Africa (for beginners.

⭐ More related content: 

• 10 Clever ways to save money (must know money-hacks)
• Pay off your home loan in half the time (Here’s how)
• Best extra income opportunities (earn more in South Africa)

 

Okay, so what did we learn…

 

In summary

Whether you take a month-to-month approach, follow a 6-month plan, or try a 12-month investment plan, make sure you invest.

Leaving money in the bank isn’t the best way to grow your wealth. Investing can help the funds to grow.

Start thinking about investing monthly. Your future self will thank you.

If you want to take care of your debt before you start investing. Talk to someone on our team at My Debt Hero. We specialise in helping South Africans with their debt.