An automatic investment plan is an easy way to invest money in mutual funds and other investment strategies. It involves authorizing a set amount of money to be withdrawn from a checking or savings account on a recurring basis and invested on behalf of the shareholder. This method is becoming increasingly popular as a means of accumulating resources 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. Essentially, an automatic investment plan is simply an authorization to withdraw a set amount of money from a checking or savings account on a recurring basis. Withdrawn funds are invested on behalf of the shareholder or investor, either by purchasing additional shares of shares already owned by the investor, or by purchasing shares for a new addition to the investment portfolio. Here’s some background on how the automatic 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 setting up automatic transfers for utility bills, insurance payments, and other types of electronic withdrawals. After consulting with the entity that manages the investments, 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 regular monthly expenses, so the investor is not left with cash on hand.
A good idea is to set a withdrawal date that will be a few days after a typical payment date. The investor may choose to schedule more than one investment plan debit per month, depending on how often funds are credited to the account. From there, it’s a matter of providing the investment firm with the routing number and account number of the account that will be used for withdrawals.
Automatic investment plans work very well for many people. One obvious advantage is that the investor does not have to take the time to manually add funds to the investment portfolio. Since the fixed amount is automatically deducted, the value of the portfolio has the potential to increase each month. Also, since the funds are already earmarked for that purpose, the investor simply deducts the amount from the balance in the account and turns their attention to 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 extensive time consulting with the investor about the need to purchase additional shares.
With more companies and individuals using investments as a means to accumulate resources for retirement plans, the concept of using an automatic investment plan has become very common. As a means of creating good savings for later years, automatic investment plans help take a lot of guesswork out of the process and also minimize the chance that the investor will hesitate to commit to adding funds to the plan at a certain time. regularly.
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