Regular Contributions

Your investment contributions should do the heavy lifting.

Many investors spend a great deal of time choosing the ‘perfect’ investment portfolio on their journey to building wealth.

While investment returns can be the difference between a good and a great retirement, they are ultimately out of our control. The best we can do is to position our portfolios for the return we need, but the rest is up to the financial markets.

However, another element contributes to our financial success and is arguably far more important, which is controlling what we can. Our financial success is based on the investment market returns we receive and on the money we contribute to our investment portfolios.

In contrast to our investment returns, our investment contributions are entirely under our control. The more we contribute to our portfolios, the greater the potential for future compounding growth.

An inconvenient truth for some, this means that our future financial success is largely down to us. Any additional money contributed to our portfolios is a sacrifice of current consumption and an investment in our future selves. The discipline to continue prioritising our futures over our present needs is often the difference between surviving rather than thriving in retirement.

A simple calculation shows that assuming regular contributions and reasonable return assumptions, market returns can take up to 20 years to surpass the amount we've contributed.

While returns can contribute significantly to our wealth, our disciplined, regular contributions to our investment portfolios will do the heavy lifting, especially in the early years.

Some clients have consistently prioritised their investment contributions, even during challenging economic times. For them, pausing contributions was a last resort, and they instead found ways to adjust other aspects of their lifestyle.

Conversely, other clients paused their contributions at the first sign of financial difficulty, planning to resume them once conditions improved. This period often lasts longer than anticipated, leading to significantly different outcomes than their diligent peers.

We encourage you to reconsider how you perceive your investment contributions. Treat them as your most important monthly expense—an investment in your future self. Prioritise them over other discretionary expenses if necessary. By reframing your mindset, you'll acknowledge the control you have over your financial success.

On the other side of this discipline lies compounding growth that will reward the disciplined investor many times over once it reaches a tipping point. This will result in true financial freedom.

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