Being a successful investor is all about keeping your money in play. That's why successful investors invest on a regular basis.

Investing Means You're Not Spending

When you don't invest regularly, you're not keeping you money in play. Money that's not in the market doesn't reap the benefits of time and compounding. In fact, money that's not in the stock market is eventually money that's spent. And money that's spent creates a negative return.

Huh?

Think about it. The stuff you buy usually costs you more than the initial price tag. Homes require insurance, maintenance, utilities, and furniture. Autos require gasoline, insurance, and maintenance. Clothing requires cleaning and mending, not to mention new clothes to go with the clothes you just bought. Computers require Internet connections, printers, toner cartridges, software, and computer paper. Stereo systems require speakers and compact discs.

It's Carlson's Rule of Stuff — Stuff begets stuff begets more stuff.

If you spend instead of invest, you're not just losing returns on the money you spend. The money you spend generates a negative return because you spend more money to support the stuff you buy. That's why spending is so dangerous. It has a negative multiplier effect. Spending is really negative compounding.

If you invest every month, even if it is only a few bucks, you rid yourself of money that, if spent, will cost you even more money in the long run. That's why it pays to invest even a little amount each month -- $10, $50, $100, whatever you can afford. Don't wait until you save a larger amount to invest. This is a common mistake investors make. The problem with waiting until you accumulate funds is that the money is readily available and tempts you to spend on some foolish toy. Get the money into the stock market as soon as possible. You'll be much better off in the long run.

One and Done is Not Enough

A big reason to invest regularly is that, without doing so, you'll never get to seven figures. It's doubtful your initial investment will grow enough to reach seven figures. You need to put more money into the market over time. Run the numbers:

		Let's say you invest $10,000 and never make another contribution again. Over 20 years at 11 percent per year, that $10,000 grows to $80,623.
		Now, let's say you make that $10,000 investment and add just $50 per month. Instead of $80,623 at the end of 20 years, you'll have $133,029. What makes this example so powerful is that, in order to achieve an additional $52,406 ($133,029 minus $80,623), you had to invest only an additional $12,000 ($50 per month for 20 years).
		Now, let's say that instead of $50 per month, you invest $100 per month. The amount at the end of 20 years (assuming 11 percent annual return) grows to $176,707. Remember that you invested just $34,000 ($10,000 plus $100 per month for 20 years) to create a portfolio worth $176,707.

These examples drive home two important points. First, in order to make big money, seven-figure money, you need to invest regularly. Second, small changes in monthly investments have huge impacts on your portfolio over a long time frame. That's why it is so important to invest every month, regardless of the amount. Even small amounts of money can add up to big dollars over 20 or 30 years.

Dollar-cost averaging and Periodic Investment Plans do not assure a profit and do not protect against losses in declining markets and you should consider your financial ability to continue to purchase through periods of low price levels.

Time Diversification

Investing every month lowers your investment risk. Diversification usually refers to investing in a variety of assets — stocks, bonds, real estate, etc. — in order to lower portfolio risk. You can also diversify across time. How? By spreading investments over a period of time. Investing every month is a form of time diversification. When you invest monthly, you limit your risks of buying at market peaks. You also assure yourself of periodically buying near market low points.

Investing on Autopilot

Investing on a monthly basis instills discipline to an investment program. This is crucial since you need to invest during good times and bad. In fact, you cannot build a seven-figure investment portfolio without buying during crummy market periods. That's when stocks are on sale. That's when you get the best buys. That's when your investment dollars offer the most leverage. If you fail to routinize your investment program by investing every month, you may not have the courage to invest during down markets.

How do everyday millionaires develop such discipline in their investment programs? They put their investments on autopilot. Investments are done automatically, oftentimes without having to write a check. In many cases, they never see the money going to their investments.

Reinvesting Dividends

One way to invest on autopilot is by reinvesting dividends on your investments.

An investment has two ways to make money. The investment can rise in price. This is called price appreciation. The investment can also throw off cash flows in the form of dividends. An investment's total return is the sum of the return generated from price appreciation plus the return generated by dividends.

For example, let's say you buy a stock that yields 3 percent. (Dividend yield is the annual dividend per share divided by the stock price per share. A $20 stock that pays an annual dividend of $0.50 per share has a yield of 2.5 percent.) For the year, the stock rises 15 percent. What is your total return of the investment? The total return is approximately 17.5 percent (15 percent appreciation plus the 2.5 percent dividend yield).

Let's say you own 100 shares of IBM. IBM currently pays 48 cents per share in dividends each year. Your 100 shares entitle you to $48 in annual dividends. If you want, you could receive a check for the dividends. Millionaire investors, however, choose to put dividends back into their investments via dividend reinvestment. You can invest that $48 in dividends to buy additional share or shares of IBM. You can reinvest dividends on mutual funds, too.

Reinvesting dividends offers a variety of wealth-building benefits. First, since dividends are paid every three months, reinvesting dividends assures that you will invest regularly, at least once a quarter. Second, reinvesting dividends amplifies the power of compounding in your investment since you are leaving more money in your investments to grow.

You can set up dividend reinvestment with most mutual funds and brokerage firms.

Automatic Electronic Investment Programs

One way to put your investment program on autopilot is to establish automatic electronic investment services with your funds and brokerage accounts. Automatic debit services allow you to have your bank account electronically debited each month to invest regularly.

Payroll Deduction

Another way to put your investment on autopilot is payroll deduction, especially to fund a 401(k) plan. The beauty of payroll deduction is that you don't have to do anything once you've chosen your investments. You don't have to remember to cut a check. It's truly no muss, no fuss investing. That's what you want as an investor -- an investment so simple that you never see the money, so you never spend it. Your employer's 401(k) plan is perfect for dollar-cost averaging.

The Power of Baby Steps

As an investor, you can create a seven-figure portfolio merely by taking a series of small steps over many years.

I came across an amazing little article on the Internet entitled "The Slight Edge Philosophy" (www.topachievement.com/slightedge.html). The article, written by Jeff Olson, talks about the power of baby steps and how small incremental changes can have huge impacts.

"In the process of learning how to walk," writes Mr. Olson, "you probably spent more time failing than you did succeeding. But did you ever have the thought of quitting? Did you ever tell yourself, 'I'm not cut out for walking — guess I'll crawl for the rest of my life?' No, of course you didn't. So why do you do that now?" Mr. Olson believes we fail to achieve our goals because we become unwilling to take baby steps. "You put your trust in achieving breakthroughs, making quantum leaps, instant this, instant that, hitting the lottery. You began a habit of settling for less, just because more was so far out of your reach. You forgot about the most proven powerful success philosophy on earth — The Slight Edge.

Mr. Olson uses the following example to show the power of the "Slight Edge" philosophy. If you were to improve just .003 each day — that's only three-tenths of one percent , a very slight edge — and you kept that up for the next five years, here's what would happen to you:

		The first year you would improve 100 percent.
		The second year you would improve 200 percent.
		The third year you would improve 400 percent.
		The fourth year you would be a better person by 800 percent.
		By the end of year five — simply by improving three-tenths of one percent per day — you will have magnified your value, your skills, and the results you accomplished 1600 percent.

The "Slight Edge" philosophy works the same way with investing. The table below shows the power of the "Slight Edge" philosophy as it applies to investing regular amounts each month:

Investment Amount	Annual Return	Holding Period	Total
$50 per month	11.0 percent	10 years	$10,949
$60 per month	11.0 percent	12 years	$17,973
$75 per month	11.2 percent	15 years	$35,070
$80 per month	11.3 percent	18 years	$56,360
$95 per month	11.4 percent	20 years	$87,544
$100 per month	11.5 percent	25 years	$173,659

Check out the payoff of squeezing out $50 more each month ($100 versus just $50), earning just 0.5 percent more per year (11.5 percent versus 11.0 percent), and holding for 25 years instead of 10. Your reward is more than $162,000 ($173,659 minus $10,949). What is especially telling is the jump in return by adding just $5 to your monthly investment ($100 versus $95), earning 0.1 percent more per year (11.5 percent versus 11.4 percent) and lengthening your holding period five years (25 years versus 20 years). The reward for these baby steps? $86,115.
The securities markets are subject to the risks of fluctuating prices and the uncertainty of rates of return and yields inherent in investing and past performance is no guarantee of future results.

That's how you can get rich in the market. Not in quantum leaps. But in baby steps.

Keep Investing, Even During Bear Markets

Too many people allow their investing habits to be influenced by whether the market is a "bear market" or a "bull market." During "bear markets," when stock prices are undergoing a general decline (the typical bear market since 1899 has lasted about 15 months), many investors refuse to invest. Admittedly, it's difficult to invest when stock prices fall almost daily. Nevertheless, the only way you make a long-term investment strategy work is to buy stocks during bear markets. That's how you build positions to take advantage of bull markets.

Conclusion

Investing every month is essential to a successful financial plan. Investing every month means you're spending less and not incurring spending's negative compounding. Investing every month lowers investment risk because of time diversification. Investing monthly puts more money into play, something you'll need to do if you want a seven-figure portfolio.

Moral of the story: Invest something every month, regardless of the amount. Trust me — it will make a big difference over time.

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