How to Successfully Build Wealth With Systematic Investing

Daniel Penzing
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Leverage Payroll Savings

The more you work for the government, the more they want you to save for your retirement. For federal employees, there are two main retirement account options: the Basic Retirement Plan and the Thrift Savings Plan (TSP).

The Basic Retirement Plan is an employee-directed plan, which means that you get to select your own investments. There is a plan of action put in place to help manage your portfolio and keep it on track.

The Thrift Savings Plan (TSP) is similar to the Basic Retirement Plan, except that the TSP is employer-directed, which means that the Portfolio Service Aggregator (PSA) handles the whole thing. You have an option to change which funds you want to invest in and to direct the PSA to sell or buy various funds, but for the most part, the PSA does the heavy lifting for you.

With the Basic Retirement Plan, you can choose your own funds, which means that you have more control over which funds you go into and out of. The downside of this is that you will pay more in taxes.

On the other hand, there is a minor convenience to being in the employer-directed TSP, even though you have very limited control over which funds you’re invested in. Since the TSP is employer directed, quarterly and annual taxes are automatically withheld and paid for you.

Use Other Periodic Savings Methods

You may have enough money saved up to buy the stock of your choice. If not, you can use other periodic savings methods. One of those is the dollar cost averaging method.

This involves buying a set number of shares each month at predetermined times. Each time you make a purchase, the order should be set so that one order is placed when the market is low, and an equal-sized order is placed when the market is higher than its previous high.

For instance, if the stock market sinks to a new low level the first week of the month, buy X number of shares at that time. The second week of the month should see the market rise to a new high. At that time, buy X number of shares at the new high.