What is Continuous Contribution?
Continuous contribution means maintaining regular investments through all market conditions, whether prices are rising, falling, or moving sideways. The approach rests on the view that staying invested is easier to sustain than trying to time the market. By investing consistently, you buy more shares when prices are low and fewer when prices are high, which is expected to smooth out your average purchase price over time.
The Power of Consistency
An investor who stops contributing during a downturn no longer buys at the lower prices the downturn creates, and may also miss the rebound that follows. The timing of a rebound cannot be known in advance, so continuing to contribute is the simpler way to stay exposed to a recovery.
Key Considerations
The biggest obstacle to continuous contribution is emotional. Market crashes trigger fear that makes investors want to stop or withdraw. Automating contributions removes this emotional decision point. Setting up automatic transfers to investment accounts on payday ensures consistency regardless of market sentiment or headlines.