From looking at the title, you might be thinking this blog is about Chik-fil-a and their brilliant marketing campaigns. However, that is not the case. This is an article about why I am a huge proponent of consistent and disciplined investing. The following story illustrates the power of this idea.
There once was a farmer who wanted to diversify so he set up an automatic draft to invest $1,000 in cows every month. The first month cows were selling at $1,000, so he purchased one cow. The next month, the price of cows had fallen to $500, but the farmer stuck to his commitment and purchased 2 cows in the second month. In the third month, the price of cows had fallen even further to $250, but it was harvest time and the farmer was too busy to notice, and his auto-draft went in and he purchased 4 cows. In the fourth month, cows mooooved their way back up to $500, so his investment bought 2 more cows. Finally, in the fifth month the price of cows really hoofed it back up to $1,000 so he bought one cow. So over the entire five months the farmer had invested $5,000 and owned 10 cows (1+2+4+2+1=10) now worth $1,000 each or $10,000! So he doubled his money, and the price of cows never got above where he started purchasing them!
Now, obviously this is an oversimplified and extreme example, but it displays the power of having a consistent, disciplined, and ongoing investment strategy. Proverbs 13:11b says “…whoever gathers money little by little makes it grow.” I see numerous benefits to following the principle set forth in this verse and having monthly automatic investments set up:
- It helps take the emotion out of investing and ensures that you won’t forget or fail to follow through.
- It helps instill discipline, because the money is automatically invested and can’t be spent elsewhere.
- It forms a good habit by having consistent savings built into your budget.
- Although your budget may feel it when you first implement a strategy like this, eventually you won’t even notice the money being invested and will be practicing good stewardship by living below your means.
- It ensures that you adhere to sound investment principles, by causing you to buy more cows when the price is low, and less cows when the price is high.
- And, finally, it will help you better stomach the inevitable downturns in the market, because the day you invest you actually want the market to be down so you can buy more cows!
These are just a few of the reasons why I encourage people to set up systematic investment plans. Whether you are buying shares of cows or shares of Apple (stock that is) this concept is something I encourage.
