An Automated Investment Plan is a simple way to invest money by authorizing a fixed amount to be withdrawn from a savings or checking account on a recurring basis. It is easy to set up and helps to build an investment portfolio without wasting time manually adding funds. Automated investment plans have become common for building assets for retirement plans.
Many people who choose to invest money in mutual funds and other types of investment strategies choose to use an automatic investment plan. In essence, an Automated Investment Plan is a simple authorization to withdraw a fixed amount of money from a savings or checking account on a recurring basis. The funds withdrawn are then invested on behalf of the shareholder or investor, either by purchasing additional shares of stock already owned by the investor or by purchasing shares for a new addition to the investment portfolio. Here’s some insight into how the Auto Investment Plan works and why it can be such an easy way to build an investment portfolio.
Setting up an automatic investment plan is as simple as establishing automatic transfers for bills, insurance payments and other types of electronic withdrawals. After consulting with the investment management entity, the investor determines an amount that can be debited from an existing checking or savings account. This amount should be funds that are not needed for normal monthly expenses so that the investor does not run out of cash.
A good idea is to set a withdrawal date that will be a few days after a typical payout date. The investor may choose to schedule more than one Investment Plan charge per month, depending on how often funds are credited to the account. From there, it involves providing the investment firm with the routing number and account number for the account that will be used for withdrawals.
Automatic investing plans work very well for many people. An obvious advantage is that the investor does not have to waste time manually adding funds to the investment portfolio. Since the fixed amount is automatically deducted, the value of the portfolio can increase every month. Furthermore, since the funds are already earmarked for this purpose, the investor simply deducts the amount from the account balance and focuses his attention on other matters. The investment firm receives the funds and applies the additional funds to existing investment plans on behalf of the shareholder, without the need to spend much time conferring with the investor on the need to purchase additional shares.
With more companies and individuals using investing as a means to build assets for retirement plans, the concept of using an automated investment plan has become very common. As a means of building up a nice nest egg for years to come, automated investment plans help take a lot of the guesswork out of the process and also minimize the chance of the investor wavering about a commitment to add funds to the plan on a regular basis.
Smart Asset.
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