In this post, I will be sharing how Standing Instruction benefits my investment.
What is a Standing Instruction?
Ever heard of Standing Instruction before? It is the instruction given by the bank account holder to his or her bank to make a fixed automatic transfer to another party’s bank account.
The bank account holder can preset the time or date for the automatic transfer to take place. The bank account holder can also preset the regularity of the transfer to take place. For example, whether on a weekly or monthly basis.
Standing Instruction is commonly used by the bank account holder to make a fixed monthly payment. Some examples are a car loan, housing loan or utility bills.
As for me, I am using Standing Instruction to transfer a fixed amount to my unit trust fund on a monthly basis.
Since my bank account and my unit trust fund belong to the same financial group of companies, there is no service charge involved.
For transferring the fund to a different entity, there might be additional service charges involved. It is best to check with the related bank.
4 ways how Standing Instruction benefits my investment
So, how Standing Instruction benefits my investment?
I will share four ways how Standing Instruction benefits my investment throughout the past few years.
1. Utilize dollar-cost-averaging method
According to Investopedia, “Dollar-cost averaging (DCA) is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price”.
By using Standing Instruction, automatically I am applying the concept of dollar-cost averaging to my investment.
It helps me to diligently put my money aside for investment purposes at a specific date of the month, no matter whether the price is low or high.
So, when the price is low, I got to buy more and when the price is high, I buy less. Over the long run, this practice reduces the investment risk and enable me to enjoy a greater return on investment.
Without Standing Instruction, I might have the fear to invest when the price is high.
Or, I might miss out on the opportunity to invest when the price is low for hoping that the price will drop further.
2. A fixed forced saving
In our demanding financial life now, it is hard to save even just 5% of our income.
In the usual practice, once received the paycheck, wage earners will pay their monthly instalments, insurance, credit cards and other utility bills.
This means the money will go to someone else account’s first.
I changed this practice by giving my bank a Standing Instruction to transfer a fixed amount of my income to my investment fund right after receiving my paycheck.
In this way, I am applying the ‘pay yourself first’ concept.
Over the long run, with this fixed forced saving on a monthly basis, the amount saved has grown into a substantial amount.
3. Save my time, money and hassle
Needless to say, using Standing Instruction helps me to save my precious time, money and hassle.
I save time and money because there is no need for me to do the transaction myself. There is also no need to drive to the bank, find parking, go to the ATM or bank counter to do the transaction yourself.
Of course, I can choose to do it online but I still need to spend my precious time doing the transaction myself.
So, instead of wasting my time to do the transaction myself, I can use the precious time to concentrate on other important matters.
4. Prevent forgetting to make an investment
I admit that sometimes I do forget to pay some of my utility bills. Blame it on my busy daily chores or my toddler or anything else.
What more to say if I need to top up my investment manually on a specific date? I guess I will easily forget because my concentration was on other things which are more urgent and with higher priority.
So, with Standing Instruction, it solves my forgetfulness problem. I do not need to constantly remind myself to top up my investment on a specific date.
Most importantly, I will never forget to make a top-up for my investment.
Final thoughts
I am glad that I am using Standing Instruction to ensure a timely top-up to my investment. It does make a difference to my investment in terms of performance.
Since I am using Standing Instruction for my long term investment fund, I will let it stay active.
I hope my sharing on how Standing Instruction benefits my investment is beneficial to you. Perhaps you can consider setting up Standing Instruction for your investment too.
photo credit: investmentzen Money Paper Airplane via photopin (license)
