5 Tips to Automate your Investment Plan
Investing is one of the reliable ways to ensure financial security in the future. A majority of people are always on the lookout for the best investments available to them. That’s because they want to diversify their portfolio as much as possible to minimize risk while they increase their returns.
However, some people believe that if you want to invest heavily, then you’ll also need to create time to manage your investments. Well, this does not necessarily have to be the case. One of the easiest ways to get the most consistent results in investing with less hassle is to automate them.
Automation will help you keep track of all your investments passively and with less hassle. Technological advancement has made automatic investing very easy. If you automate your investing plan, you can focus on making money online, which will increase your income and provide for more opportunities to invest.
So, What Is Automatic Investing?
Automatic Investing involves having a predetermined fixed amount of money taken from your bank account or paycheck automatically to be invested in a predetermined asset periodically. For example, you can make automatic contributions to the retirement plans such as 401(k) or 403(b).
So here are five tips that can help you automate your investing plan:
Put your Investments on autopilot
If you put your finances on autopilot, then you’ll manage to save more and worry less. You can plan to have automatic transfers from your bank account to your brokerage firm or mutual funds periodically. This is the best form of dollar cost averaging. You can also use automatic rebalancing to rebalance your accounts and to maintain your investment policy.
Most mutual funds companies make it easy for you to set up automatic investing. They have the minimum requirements that you must adhere to. However, in most cases, they will waive the minimum investment requirements to attract more investors.
With these companies, you only need to set up an automatic transfer from your paycheck or bank account and direct it to your investment account. Then, you specify the mutual funds that you want to invest in and the money that will be invested at the current price automatically.
If you want to keep automatic investing affordable, then you need to invest directly with a specific mutual fund company. For example, you buy Fidelity funds through Fidelity or Vanguard funds through Vanguard Company. That way, it will be cheaper because you will not pay the trade commission each period.
You can use software like Robo-advisors to help you with investment automation. The Robo-advisors allow you to invest with ease automatically. For example, With M1 Finance, you can invest with no extra fees and even set up a weekly, bi-monthly, and monthly schedule to deposit money to your account.
The Robo-advisors base their service on Modern Portfolio Theory(MPT) that include asset allocation, diversification, and rebalancing, which are all part of a goal-oriented investment strategy designed on time-tested economic concepts. Each Robo-advisor option offers you the primary ways to boost your wealth over time considerably.
Hire a financial advisor
If you want to invest passively, then you can hire an independent financial advisor to do it on your behalf. The financial advisor will make sense of all your investments. They will check all your real estate, insurance, and retirement plans, among others and make sure that everything fits coherently.
For example, a financial advisor can examine different investment options such as your 401(k) or 403(b) and recommend the best options. They can help you choose the best among many mutual funds in a 401(k).
The process of hiring an advisor is straightforward. First, you must determine how much money you want to invest and from which account. Secondly, contact your investment advisor and let them know that you want to set up an automatic investment plan and the money you want to be invested. The advisor will do all the paperwork for you once you sign on the dotted line.
Use Index-based ETFs
Another ideal way to automate your investments is to make use of the index-based exchange trading funds. These vehicles can help you track the performance of a given index. This is one of the best ways to diversify your portfolio efficiently without owning several different mutual funds or individual securities.
Alternatively, you can also use the target funds. Target funds are usually aimed at the date when you’ll need the money, for example, when you go to college or in retirement. Target funds often work under different assumptions. For example, you can have two target funds with a date of 2022, but they will ensure a diverse mix of stocks and bonds as the date nears. However, they assume similar things for everyone who wants to retire in a given year and does not necessarily put the different ages into consideration.
Merge your Accounts
Most people have opened different accounts, all of which serve different purposes. If you receive monthly statements from each of these accounts, it can be pretty overwhelming to review each of them separately. But if you consolidate them together so that you will receiving fewer statements, then it will reduce paperwork and become more efficient and time-saving for you.
You can use one custodian to handle both the retirement and investments account for you. For example, if you have a 401(k) from your previous employer, then you can roll them over into a single rollover IRA. This will help you manage them more quickly and automatically.
Automation is key to precise investment management. The ultimate goal for your investments is to achieve financial independence. Therefore, whichever option you choose, it should match that goal.
But, if you automate everything, you also need to review your statements and investments periodically to avoid any surprises. Ask all the parties involved any questions about anything you don’t understand. Focus on things like making $200 per day with side hustles. Then, move onto investing that income at a fast rate.