Auto investing for the future is one of the most sure-proof ways to ensure you’re not broke at retirement age. Putting away a little money at a time may sound boring, but it’s the backbone of any long-term financial plan. Here’s what beginners need to know about getting started with automatic investing, and what experienced investors can do to level up their investment game.
Why Invest Automatically?
One of the hardest parts of maintaining a savings and investing habit is remembering to do the saving and investing. If you have a manual savings plan, you might have to put cash in a jar or remember to click a button every payday. While that can work for some people, it’s far from ideal. When you don’t automate, you’re setting yourself up for failure.
Automating allows you to invest without thinking about it. When direct deposit lands in your account on payday or your regular schedule triggers, the money goes right into your investment account. It could be automatically invested in your chosen stocks, bonds, currencies, commodities, funds and anything else you choose.
5 Ways to Automate Your Investments
Without any extra manual effort, you can slowly and steadily build up a portfolio worth thousands or more. Here are five ways to automate your investments without manual work.
1. Recurring Transfer to Your Investment Account
The easiest way for most people to invest automatically is with an automatic transfer managed through their investment account. If you’re a forex trader, you can log in to deposit daily, weekly, biweekly, monthly, bimonthly, or on any other schedule you pick.
I’m a big fan of lining up your transfers with payday. That way, it’s like the money was never in your checking account, so you probably won’t miss it. Some experts call this 'paying yourself first', and I’m a huge fan.
2. Invest in an Employer-Sponsored Account
If you work somewhere with an employer-sponsored retirement plan, fully participate. When your employer is willing to match your contributions, take 100% advantage of it. It’s like leaving free money on the table.
Even better, this type of automation usually happens before your paycheck or direct deposit is issued. Again, you’re putting money away for the future without giving yourself a temptation to spend it elsewhere.
3. Split Direct Deposit from Your Employer
A large portion of people are paid electronically without a physical paycheck. I mean, it’s not the 90s anymore, is it? And, even then, we already had direct deposit as an option! While technology hasn’t changed much in 20 years, you may have an option you don’t know about.
Many employers allow you to split your recurring paycheck into two or more accounts using a fixed amount or percentage. If you put 15% of your paycheck or $100 every payday into an investment plan, for example, you’re doing your future a great service.
4. Automatically Add to a Savings Account for Future Investments
If you don’t feel comfortable investing your money via auto investing in the markets, you can use a bank account as a staging area for your investments. Putting funds into a high-yield savings account regularly gives you cash to invest when you’re ready to click the button.
5. Use an Automatic Investment Round-Up App
Some investors like to let someone else figure out the investment schedule. Creative apps round up your card-based purchases or do the math to automatically contribute based on your income and spending schedule to funnel funds into investments.
Watch out for any investment or account fees and other potential costs that cut into your investment profits before they start.
What You Can Buy with an Auto Investing Strategy
When you’re getting your auto investing strategy set up for the first time, you may not know what you can buy. The answer is simple. If you can invest in it manually, there’s probably an automatic way to save time and add to your account balance.
- Traditional stocks, bonds and funds: These are among the most commonly automated investments. You can pick a combination of stocks, bonds, mutual funds and ETFs automatically purchased on your schedule.
- Forex: Foreign exchange is a passion point for the Finance Magnates team. You can buy USD, EUR, AUD, JPY and other currencies using an automatic schedule if you believe a specific currency or economy will grow over time.
- Commodities: Everything from wheat to oil to pork bellies can be traded on commodities exchanges. Like forex, it’s important to take steps to limit your risk of losses from sudden market fluctuations.
- Cryptocurrency: Cryptocurrency is a newer asset, but one many believe is the future of finance. Most major exchanges offer simple plans to fund your account and invest in Bitcoin, Ethereum and other cryptos on your chosen frequency.
- Options and futures: Options and futures are harder to automate. If you use these tools heavily, it may be best to automatically add funds to your account and pick your specific contacts manually.
Remember, when you invest automatically, you’re taking on some investment risk without first reviewing it. That means it’s very important to think through your strategy before investing, so you don’t open your account one day to an unpleasant surprise.
The Bottom Line on Automatic Investing
Auto investing isn’t something just for the tech-savvy, wealthy or ultra-rich. Anyone with a computer or smartphone, a bank account and an investment account can automate their investing plan. If you’re not automatically investing yet, what are you waiting for? It’s a great time to get started.
