While most people have a general idea of where they want to go with their investments, there are some who struggle to find the time to create an investment plan and keep it updated over time. Without it, you’re in the dark about how much you’ve invested and where your money is going.
To help you develop your automated investment plan, here are the most applicable ways you can automate your money management to focus on other aspects of your financial life instead of wasting time on things like rebalancing and reviewing your portfolio every few months.
What is an Automated Investment Plan?
An automated investment plan (AIP) is a specialized type of savings account that allows you to make regular investments at predetermined intervals, allowing you to set it and forget it.
How Do You Setup An Auto Investing Program?
Automatic investing plans help you save for retirement by automatically deducting money from your bank account and investing it in a diversified portfolio of funds.
Step by Step Guide to Setting up an Auto Investing Program
Step 1: Determine your investment goals. Before you start investing, you need to know what you’re saving for and how much money you have available.
Step 2: Choose a type of program. Once you’ve determined your investment goals, it’s time to choose an automatic investing plan that meets those needs.
Step 3: Choose your investment options. Once you’ve chosen a program, it’s time to choose which investments you want in your portfolio.
Step 4: Start investing. After choosing a type of program and selecting your investments, you’re ready to get started. All that’s left is making regular contributions, which can be automatically deducted from your bank account or paycheck and invested on your behalf.
Most companies offer automatic investment programs, including target-date funds, lifecycle funds, individual mutual funds, or exchange-traded funds (ETFs). Each type has its advantages and disadvantages.
How Does A Robo Advisor Work?
According to the experts at SoFi, a robo investing advisor is an online service that provides automated, algorithm-based portfolio management without human intervention. A robo advisor will help you manage your investment portfolio.
Creating a Basic Robo Advisor
While many sites offer robo-advisor services, such as Investifront. Two good free options are SoFi and Lantern Credit.
Benefits of using Auto Investing Programs
1. You’re not as likely to panic and sell when markets are down because you don’t have any say in when your money is invested or withdrawn.
2. Auto investing programs can help diversify your portfolio by spreading investments across multiple asset classes (stocks, bonds, and cash).
3. Auto investing programs can help lower trading costs by making small purchases over time instead of one large trade at a time.
4. You can use auto investing programs to set up an emergency fund that automatically withdraws money from your checking account if it falls below a certain balance.
One potential drawback of these programs is that some don’t allow you any flexibility. The program will invest your money when it decides, not when you want to.
An automated investment plan is a good way to invest regularly, according to your investment preferences. Even though it takes some time and effort upfront, an automated investment plan will help you maintain regular investing discipline over time.