Set Up Automatic Investing (Dollar-Cost Averaging)

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What You’ll Learn

• What dollar-cost averaging (DCA) is and why it works
• How to set up automatic transfers from bank to brokerage
• How to set up automatic stock/ETF purchases
• Optimal contribution amounts based on income
• How DCA removes emotions from investing
• The math: How $500/month becomes$1.8 million
• Common DCA mistakes and how to avoid them

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Why This Matters

• 💰 You want to build wealth systematically
• 🔄 You want investing to be automatic (not dependent on discipline)
• 📈 You understand consistency beats perfection
• 😰 You don’t want to time the market
• ⏰ You value your time (don’t want to think about investing weekly)

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What is Dollar-Cost Averaging (DCA)?

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The Simple Definition

• Trying to “time the market” (buying when price is “right”)
• Investing lump sums irregularly
• Making emotional decisions

• Invest $X every month on the same day
• Whether market is up or down
• Automatically, without thinking
• For decades

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How DCA Works

• Invest $500 → Buy 1.25 shares
• Total shares: 1.25

• Invest $500 → Buy 1.43 shares (more shares at lower price!)
• Total shares: 2.68
• Average cost per share: $373

• Invest $500 → Buy 1.32 shares
• Total shares: 4.00
• Average cost per share: $375

• Invest $500 → Buy 1.19 shares
• Total shares: 5.19
• Average cost per share: $385
• Current value: $2,180 (invested$2,000)
• Gain: $180 (9%)

• You bought more shares when price was low (month 2)
• You bought fewer shares when price was high (month 4)
• Your average cost is better than if you timed it poorly
• Works automatically without emotion

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DCA vs Lump Sum vs Timing

• Pros: Statistically best 2/3 of the time (market usually goes up)
• Cons: Maximum regret if market drops tomorrow
• Best for: Experienced investors comfortable with volatility

• Pros: Reduces timing risk, psychologically easier, smooths entry
• Cons: Might miss gains if market goes straight up
• Best for: Beginners, anyone nervous about lump sum

• Pros: None (feels smart but isn’t)
• Cons: Miss entire gains waiting, impossible to time bottom, paralysis
• Best for: No one (avoid this)

• Lump sum beats DCA 66% of the time historically
• But DCA beats market timing 95% of the time
• DCA provides better sleep for beginners (reduced regret)

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The Math: How DCA Builds Millions

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Example 1: The $500/Month Millionaire

• Monthly: $500
• Years: 40
• Total invested: $240,000
• At 10% annual return: $3,162,033

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Example 2: The $250/Month Half-Millionaire

• Monthly: $250
• Years: 35
• Total invested: $105,000
• At 10% annual return: $886,655

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Example 3: The $1,000/Month Multi-Millionaire

• Monthly: $1,000
• Years: 43
• Total invested: $516,000
• At 10% annual return: $7,371,490

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The Power of Starting Early

• Total invested: $60,000 (120 months ×$500)
• At age 65 (30 years of compounding after stopping): $1,365,227

• Total invested: $180,000 (360 months ×$500)
• At age 65: $1,019,017

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Step 1: Determine Your Monthly Contribution

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The 50/30/20 Rule

• 50% Needs (rent, food, utilities, transportation)
• 30% Wants (entertainment, dining, hobbies)
• 20% Savings + Investing

• Needs: $2,000
• Wants: $1,200
• Savings/Investing: $800

• Emergency fund building: $300/month (until 6 months saved)
• Investing: $500/month
• After emergency fund complete: $800/month investing

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Income-Based Guidelines

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Start Small, Increase Over Time

• $100/month if that’s all you have
• Build habit and confidence

• $100 →$120/month
• As income grows or expenses decrease

• $120 →$150 → $200
• Lifestyle creep in reverse (invest raises)

• $200 →$500+ per month
• Compounding accelerates

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Step 2: Choose Your Automatic Investment Strategy

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Option 1: Auto-Transfer + Auto-Invest (Full Automation)

1. Bank auto-transfers $X to brokerage on 1st of month
2. Brokerage auto-invests into your chosen stocks/ETFs
3. Zero manual work required

• True set-it-and-forget-it
• Maximum automation
• People who want zero effort

• Fidelity, Schwab, E*TRADE, M1 Finance

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Option 2: Auto-Transfer + Manual Invest

1. Bank auto-transfers $X to brokerage on 1st of month
2. You manually place buy orders (same day or within week)
3. Gives you control over exact timing and allocation

• People who want slight control
• Those adjusting allocations monthly
• Active learners

• All brokerages

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Option 3: Manual Everything

1. You remember to transfer money monthly
2. You remember to invest it

• You’ll forget some months
• Discipline required
• Inconsistent results

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Step 3: Setting Up Automatic Transfers (Bank to Brokerage)

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Fidelity Automatic Transfers

1. Log in to Fidelity.com
2. Go to “Accounts & Trade” > “Transfers”
3. Click “Set Up Automatic Transfers”
4. Select:
   • From: Your linked bank account
   • To: Your Fidelity brokerage account
   • Amount: $___/month
   • Frequency: Monthly
   • Date: 1st of month (or your payday)
5. Review and confirm
6. Done! Money transfers automatically every month

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Charles Schwab Automatic Transfers

1. Log in to Schwab.com
2. Navigate to “Accounts” > “Deposits & Transfers”
3. Click “Transfer Money”
4. Select “Recurring Transfer”
5. Set up:
   • From account: Your bank
   • To account: Schwab brokerage
   • Amount: $___
   • Frequency: Monthly / Bi-weekly / Weekly
   • Start date: ____
6. Submit

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Robinhood Recurring Deposits

1. Open Robinhood app
2. Tap “Account” (bottom right)
3. Tap “Transfers”
4. Tap “Set Up Recurring Deposit”
5. Choose:
   • Bank account
   • Amount
   • Frequency (weekly, bi-weekly, monthly)
   • Day of week/month
6. Enable and confirm

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E*TRADE Automatic Transfers

1. Log in to E*TRADE
2. Go to “Transfer” section
3. Click “Automatic Deposits”
4. Set up:
   • Source bank account
   • Destination brokerage account
   • Amount and frequency
5. Save

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Step 4: Setting Up Automatic Investments

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Fidelity Automatic Investment Plan

1. After setting up automatic transfer
2. Go to “Accounts & Trade” > “Automatic Investments”
3. Click “Set Up Plan”
4. Select:
   • Investment: VOO, VTI, or other ETF/stock
   • Amount: $350 (or your chosen amount)
   • Frequency: Monthly on 1st
   • Source: Cash in your account (from auto-transfer)
5. Repeat for each holding:
   • $350 to VOO
   • $100 to VXUS
   • $50 to BND
6. Total: $500 automatically invested monthly

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Schwab Automatic Investment Plan

1. Navigate to “Trade” > “Automatic Investing”
2. Click “Set Up New Plan”
3. Choose security (VOO, VTI, etc.)
4. Set amount and frequency
5. Select funding source (cash from auto-transfer)
6. Confirm

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Robinhood Recurring Investments (Easiest)

1. Search for stock/ETF (e.g., VOO)
2. Tap “Buy”
3. Tap “Schedule” or “Recurring”
4. Set:
   • Amount: $500
   • Frequency: Monthly
   • Day: 1st of month
5. Robinhood auto-transfers AND auto-invests in one setup

• $350/month VOO
• $100/month VXUS
• $50/month BND

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M1 Finance (Best for Full Automation)

1. Create your “pie” (portfolio allocation)
   • 70% VOO
   • 20% VXUS
   • 10% BND
2. Set up auto-deposit from bank
3. M1 automatically distributes deposits according to your pie
4. Automatically rebalances
5. Zero ongoing work

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E*TRADE Automatic Investment

• Set dollar amount to invest monthly
• E*TRADE buys fractional shares

• Set number of whole shares to buy
• E*TRADE purchases when enough cash available

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Step 5: Allocation Strategy for Auto-Investing

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Simple Three-Fund Approach

• $350 → VOO or VTI (70% U.S. stocks)
• $100 → VXUS (20% International)
• $50 → BND (10% Bonds)

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Single-Fund Approach (Simplest)

• $500 → VT (100% Total World Stock)

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Aggressive Growth Approach

• $600 → VTI (60% Total U.S.)
• $300 → VXUS (30% International)
• $100 → QQQ (10% Tech/Growth)

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Balanced Approach

• $400 → VOO (50% U.S. large cap)
• $160 → VXUS (20% International)
• $160 → BND (20% Bonds)
• $80 → VNQ (10% Real estate)

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Conservative Approach

• $420 → VOO (35% U.S. stocks)
• $240 → VXUS (20% International)
• $480 → BND (40% Bonds)
• $60 → Cash (5% Cash allocation)

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Step 6: Optimization Strategies

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Timing Your Contributions

• Easy to remember
• After payday for most people
• Consistent

• Ensures money is available
• “Pay yourself first” mentality
• Avoids spending it

• Middle of month
• Some people’s payday
• Alternative to 1st

• Not really. Consistency > perfection.
• Monthly on any day beats sporadic investing.

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Increasing Contributions Over Time

• Every January, increase contribution by 10%
• $500/month →$550/month next year
• Matches income growth typically

• Get 5% raise? Increase investing by 2.5%
• If making $4,000/month, raise to$4,200
• Increase investing from $500 to$550
• Lifestyle improves + Investing increases

• Start: $200/month
• Every 6 months: Increase by $50
• Year 1: $200 →$250
• Year 2: $300 →$350
• Year 5: $600/month
• Gradual increase sustainable

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Tax-Advantaged Accounts First

• If employer matches 5%, contribute 5%
• Free money, take it first
• Example: $5,000 salary →$250/month 401k (gets $250 match)

• $7,000/year =$583/month
• Tax-free growth forever
• After 401k match, prioritize this

• $23,000/year =$1,917/month
• Tax-deferred growth
• If you can afford, max this

• After maxing tax-advantaged accounts
• No limits on contributions
• Set up DCA into VOO/VTI

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Step 7: Monitoring Your Automated System

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Monthly Check-In (5 minutes)

1. Did automatic transfer execute? ✓
2. Did automatic investment execute? ✓
3. Any errors or failures? (fix if yes)
4. Total contributed this year: $____
5. Current portfolio value: $____

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Quarterly Deep Dive (30 minutes)

1. Review overall portfolio performance
2. Check asset allocation (still at target?)
3. Assess if contribution amount still appropriate
4. Consider increasing contribution if income grew
5. Ask Money Monty to analyze portfolio

Money, review my automated investing strategy.
I invest $500/month split:
- $350 VOO
- $100 VXUS
- $50 BND

I'm [age] and planning to retire at [retirement age].
Is this optimal? Should I adjust?

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Annual Review (1-2 hours)

1. Calculate total contributions for year
2. Calculate total gains/losses
3. Rebalance portfolio back to target allocation
4. Increase monthly contribution (10% increase recommended)
5. Update investment policy statement if life changed
6. Celebrate progress!

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Common DCA Mistakes to Avoid

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Mistake #1: Stopping During Market Drops

• Market crashes 30%
• “I’ll pause investing until it recovers”
• Stop automatic contributions

• You’re buying at DISCOUNT during crashes
• Stopping means you miss the best prices
• Defeats entire purpose of DCA

• Month 1: Buy at $400
• Month 2: Market crashes, price $280 (30% off!)
• If you stop: You miss buying at $280
• If you continue: You get 43% more shares for same money!

• Never stop during crashes
• If anything, INCREASE contributions during major drops
• Buy MORE when others panic

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Mistake #2: Increasing Spending Instead of Investing

• Get 10% raise ($500/month more)
• Lifestyle inflation: Buy nicer car, bigger apartment
• Don’t increase investing
• Still investing same $500/month despite higher income

• Get 10% raise
• Invest at least 50% of raise ($250/month)
• $500/month →$750/month investing
• Modest lifestyle improvement with other half

• Scenario A (don’t increase): $1,774,728
• Scenario B (increase by $250):$2,662,092
• Difference: $887,364 from investing half of raise

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Mistake #3: Trying to Time DCA

• Automatic investment set for 1st of month
• Market feels “high” on 1st
• Cancel automatic purchase
• “I’ll wait for a dip”
• Dip never comes
• Month ends, you didn’t invest
• Repeat for 6 months
• Lost 6 months of compounding

• Set it and forget it
• Never override automatic investments
• Trust the system

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Mistake #4: Not Adjusting for Life Changes

• Set up $500/month DCA 5 years ago
• Income doubled since then
• Still investing only $500/month
• Could easily afford $1,000/month now

• Review annually
• Increase contributions as income grows
• Lifestyle creep is enemy of wealth
• Invest your raises

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Mistake #5: Forgetting About It Completely

• Set up automated investing
• Never check again
• 10 years later: Password to account forgotten
• No idea how much wealth built
• No optimization, no increases, no rebalancing

• Monthly 5-minute check
• Quarterly 30-minute review
• Annual deep dive and rebalancing
• Stay engaged without obsessing

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Real Success Stories

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Sarah: The $300/Month Millionaire

• Started: Age 27, Teacher, $45,000 salary
• Contribution: $300/month ($3,600/year)
• Strategy: 100% in VTI, automatic monthly
• Timeline: 38 years until age 65

• Total contributed: $136,800
• Final value at 10% return: $1,219,485
• Became millionaire on teacher salary

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Mike: The Late Starter

• Started: Age 40, Accountant, $75,000 salary
• Contribution: $750/month ($9,000/year)
• Strategy: 70% VOO, 30% BND
• Timeline: 25 years until age 65

• Total contributed: $225,000
• Final value at 9% return (conservative due to bonds): $796,457
• Not a millionaire but comfortable retirement

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Jessica: The Tech Worker

• Started: Age 24, Software Engineer, $95,000 salary
• Contribution: $1,500/month ($18,000/year)
• Strategy: 80% VTI, 20% VXUS
• Timeline: 41 years until age 65

• Total contributed: $738,000
• Final value at 10% return: $9,471,768
• Multi-millionaire by retirement

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Success Checklist

• ✅ I calculated my monthly contribution amount
• ✅ I set up automatic transfer from bank to brokerage
• ✅ I set up automatic investments into my holdings
• ✅ I chose my allocation (stocks/bonds split)
• ✅ I know what day of month it executes
• ✅ I verified first transfer and investment worked

• ✅ I will NOT cancel during market drops
• ✅ I will do monthly 5-minute check
• ✅ I will review quarterly
• ✅ I will increase contributions annually (at least 10%)
• ✅ I will invest for minimum 10 years (ideally 30+)
• ✅ I will let compounding work its magic

• ✅ DCA removes emotions from investing
• ✅ Consistency beats perfection
• ✅ Time in market > timing the market
• ✅ Small amounts become millions over decades
• ✅ This is the path to retirement wealth

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What’s Next?

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Continue Building Your Wealth

• Tax-Efficient Investing Strategies →
• Monthly Portfolio Review →

• Understanding Stock Fundamentals →
• Build a Diversified Portfolio →

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Ask Sage About Your DCA Strategy

Sage, I want to set up automatic investing.
I'm [age] with $[monthly amount] to invest.
What allocation should I use? How should I automate this?

• Recommend optimal allocation for your age
• Suggest specific ETFs to auto-invest in
• Walk through setup process for your brokerage
• Calculate projected wealth at retirement
• Motivate you to start TODAY

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The Bottom Line

• ✅ The single best wealth-building strategy for regular people
• ✅ Removes emotions and timing from equation
• ✅ Turns small amounts into millions over decades
• ✅ Requires 1 hour setup, then 5 minutes/month forever
• ✅ Used by every successful long-term investor

1. Start today with ANY amount ($50,$100, $500/month)
2. Automate everything (transfers + investments)
3. Never stop (especially during market drops!)
4. Increase annually (invest raises, grow contributions)
5. Hold for decades (30-40 years = multi-millionaire)

Automatic investing + Time + Compound interest = Millionaire