Beginning Investors: Automatic Invesment Plan
For many beginning investors, there are two main concerns:
- The amount of capital needed to open an account.
- Worrying about when to buy and when to sell.
One of the ways to alleviate these concerns is through an automatic investment plan (AIP). An automatic investment plan is one in which a set amount of money is set aside regularly, automatically put into an investment.
Does this sound familiar? If you have a retirement plan, it should. Many people have their retirement contributions set up on an automatic investment plan. In the case of retirement accounts, the money is often taken out automatically from a paycheck and put into the account. In the case of some retirement accounts, there are tax benefits to contributing. (Watch out: In Washington, they are considering taking away the tax benefits.)
But an automatic investment plan can work beyond retirement accounts. Some mutual and index funds and even some stock investment plans allow you to take advantage of an automatic investment plan. Every month, you can have money withdrawn from your checking account and invested. This can be little as $20 in some cases, although many brokers require you to invest at least $50 a month.
Investopedia explains why an automatic investment plan can be of benefit:
This is one of the best ways to save money. By “paying themselves first” many people find they invest more in the long run. Their investments are treated as another part of their regular budget. It also forces a person to pay for investments automatically, which prevents them from being able to spend all of their disposable income.
If you want to earn some returns, and aren’t concerned that they be extremely large, an automatic investment plan is a good way to go. And, with the stock market in its current state, your automatic investment can buy you more bang for your buck.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
Tags: stock market, tax benefits, investing blog, automatic investment plan,
economy, investments, retirement accounts


