Having an automatic investment plan is the main foundation on which your wealth is built. In fact, if you put your paycheck away mindlessly every time you get it, your financial plan will always be on the right track. And by this, we mean putting your investments on autopilot mode. Although some of you are ready to sacrifice your time to handle the finances every money, it is advised to set up the automated investments. This blog will explain why.
Why Should You Invest instead of Save?
The very first question you should ask yourself is – how many millionaires do you know who have a savings account? And no matter how hard you try, your answer will be none. A lot of us do not focus on investing and put all our energy in saving. The reasons for this is that we are afraid of the risks that come with it. Well, that is where the automatic investment plan can help.
Basically, you need to first open a bank account and then put the investment on autopilot. With this, you will not have the fear of investment and it will also not cost you anything. Instead, this plan will turn out to be the best decision of your life.
Here is how the plan works:
The ability to purchase a fixed amount of investment regularly is known as dollar-cost averaging. This is the opposite of investing a huge amount of money. For instance, if you purchase a mutual fund for $1200 where the share price is $100, you will get 12 shares. On the other hand, if you add $100 every money for a year, you can get more or less than 12 shares at the end, mostly due to the ever-changing share prices.
Yes, purchasing shares with a huge amount together does cost you less for a share, but the risk is a lot in this. With the monthly plan, your risks are reduced. In fact, if you have a huge amount of money waiting to be invested, then invest it immediately. But for those who do not have it, this plan is for you.
There are two reasons why:
- It helps you avoid self-sabotaging yourself.
- It allows you to invest regularly in bits.
Invest As Soon As You Are Paid
Keep your money in the bank will do you no good. Instead, invest a part of what you are paid (based on your budget) to make the best out of your pay. You can ask your employer about the 401(K) plan or any similar retirement plan so that you can have deductions from your payroll added in it. If not, you can easily start a Roth IRA and add in contributions on a regular interval.
How to Set Up Your Automatic Investments?
For setting up your automatic investing in the mutual fund, you can get help from any online stock brokerage company or mutual fund company. You can have any of the both – IRS or non-retirement account set up by these companies for you. And yes, there are some minimum investment requirements for some of the automatic investment plan. But most of you will easily be eligible for it.
Here are the steps for it:
- Use your bank account to set up the automatic transfer to your investment account. It can be monthly or weekly or even daily, based on your own choice.
- Select the mutual fund that you want to invest in, and the amount will automatically be invested at the running price.
Tip: If you want your investments to be affordable, ensure that you invest directly with the mutual fund company.
So, plan your future and make it much more secure just like the many other millionaires you know about. Saving will just keep your money in one place. But investing will increase the money you have and make you wealthy in the future. What do you think? Are you already investing in a mutual fund? Share your ideas in the comments below.