An automatic investment plan is an excellent way to save for your future in a systematic, efficient and logical manner. In this method, a certain amount of money is transferred on a regular basis into an investment account such as a mutual fund. It is often monthly but may also be quarterly, annually or on a different schedule. There are many advantages to such a plan.
The thought of saving for a retirement can be daunting, especially when you know you will need so much money. Automatic investment plans are useful because they allow you to save on a regular basis. Even if you just put a little aside at a time, this will add up over time.
According to etrade, one of the advantages of an automatic investment plan is that you “pay yourself first.” In other words you do not spend the money on other items because you never actually have it in your possession. It goes straight into the retirement account on a regular basis. You do not miss it because you never really had it. You also do not need to remember to do it since it will be automatic.
With a automatic investment plan, you become accustomed to being without it and will build your budget without it in mind. However, it will still be there accruing for your future.
The time-value of money is an important part of an automatic investment plan. When you invest when you are younger with an automatic investment plan, the money will build up over time. This showcases the power of compounding.
Another advantage of automatic investment plans is that you can lower your average cost basis. Since you put in a consistent amount, you will buy more shares at a low cost and less at a high cost. This can lead to smart investing even if you are not consciously doing it.
Many people utilize automatic investment plans at work. They may contribute straight from their salary into a retirement plan, for instance. You may utilize a service to help you do it such as etrade. For instance, they offer 1000, no-load, no-transaction-fee mutual funds for you to utilize with an automatic investment plan. You make a securities brokerage account with them, make an first purchase of the fund and then fill out an enrollment form. It is a generally easy process that can set you up with financial security in the future. There are many other providers that offer this service.
An automatic investment plan can be extremely useful, and is utilized by many looking to make wise and responsible investment decisions. Consider the different options available to you.