Monday, May 19, 2008

What is Automatic Investing?

Investments & Trading

What is Automatic Investing? By J. Foley


For many, the idea of investing in mutual funds, stocks and bonds is appealing, but it all seems too complicated. Too much jargon, too much danger, too much hassle. Thankfully, the companies that run mutual funds know this and have come up with a way for new investors who may not have a big wad of cash to invest right off the bat.

It’s called automatic investing and it is highly recommended for those new to mutual funds and for those that want to invest but don’t have a lot of up-front funds.

Automatic investing is done through a mutual fund company, and what happens is, you sign up to purchase a set amount of funds either every month or every few months (usually quarterly). You buy a bit at a time, whatever you feel you can afford, and your shares are managed by the mutual fund company. It is a great way to watch a nest egg form from money you didn’t even know you had.

A great part about automatic investing is that most mutual fund companies are so excited to get new investors in, they will waive most if not all transaction and investment fees for those that are signing up for automatic investing. They understand you may not have a lot of extra cash to throw away on fees and they want you to get your feet wet with mutual funds.

Maybe the best part about automatic investing is that it is a very disciplined form of investing. Instead of opening up an E-Trade account and investing from your home computer, an investment expert at the mutual fund company that you invest in will handle your shares and in this case, it is probably best to let the experts handle it. It’s extremely tempting to chase mutual funds when investing yourself. You hear the latest news about funds that may be surging and its tempting to take your money and jump on the hottest fund, but disciplined, long-term investing is a much more beneficial way to go.

Whichever company you choose to use for automatic investing will supply you with a prospectus that will outline all of the fees that may or may not be associated with your account. This is key since you’ll need to know what any possible cost might be for things like early withdrawals.

For many, automatic investing takes the guesswork and the fear out of mutual fund investing by allowing a large amount of money to build up over time. Contact a mutual fund company to see if automatic investing is right for you!

Article Written By J. Foley

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