The Benefits of Automating Your Investment Contributions
Disclaimer: This blog is for informational purposes only and is not investment advice. Please consult a licensed financial advisor for guidance tailored to your individual circumstances.
With any financial goal, steady progress is essential. Investing money to build wealth is a worthwhile financial goal, but many people become overwhelmed with how much mental energy it can require. Automating contributions to your investment account can take a lot of the burden off your shoulders and put you on the path toward a brighter financial future. Read on to learn about the benefits of setting up automatic investment contributions.
Note: If you’d like to learn more about investing, including different investment accounts and investment products, refer to the Financial Industry Regulatory Authority (FINRA) website.
Remain Consistent
When it comes to investing, transferring funds to your investment account regularly is key. Many people believe that you must have a large amount of money to invest all at once. This simply isn’t true. Consistently contributing to an investment account is a more realistic and manageable way to grow your money. It can be easily compared to a retirement account, which is a type of investment account that many people have, either through their employer or on their own. You make consistent, smaller contributions over time, and those contributions are invested in different securities to grow your money. It’s the same with an investment account. Setting up automatic transfers is an easy way to take some of the thinking work out of it.
The same principle applies to paying down debt. Automatic payments help you remain consistent. With AutoPayPlus, you can get set up on an automated biweekly payment plan to pay off your loans faster. The sooner you pay off your debt, the more money you can focus on investing.
Avoid Impulsive Investment Decisions
Whether you’re a seasoned investor or a beginner, market fluctuations can evoke an emotional reaction. It’s common for people to make rash investment decisions when they see a significant dip or spike in the market. Instead of remaining focused on your goals and strategy, it’s easy to get distracted and be impulsive. Some brokerage firms allow you to set up automatic contributions to your account as well as offer automated investing, which automatically invests in securities on your behalf based on certain guidelines that you set. With all of this working in the background, you can expend less mental energy and avoid impulsive decisions due to market scares.
Reduce the Temptation to “Time the Market”
Some investors make decisions for the wrong reasons. Impulsivity is one thing, but trying to “time the market” is an entirely different matter. Regardless of whether you’ve been investing for 20 years or for two, nobody can predict the market. That includes brokerage firms, registered brokers, financial advisors, and individual institutions. Setting up automatic contributions keeps you on a steady path toward your objective and prevents you from trying to figure out market trends to predict future conditions.
Take Advantage of Dollar-Cost Averaging
When you contribute a consistent amount at different times, you also purchase securities at different times. Since the market is always fluctuating, that means you also have the potential to purchase them at different prices (depending on how you structure your orders). This can give you the opportunity to take advantage of dollar-cost averaging. In short, purchasing securities at different prices may reduce the average cost of your shares, and this affects your profit/loss. In some cases, purchasing securities at different times may also offer tax advantages, as short-term gains and long-term gains are taxed differently, and shares sold at a profit are taxed differently than shares sold at a loss.
Stay on Track With Your Financial Goals
Investing is all about long-term growth. When you automate your contributions, you’re setting yourself up to stay on track with reaching your financial goals and creating a secure future. Plus, if your earnings are automatically reinvested, you can further increase your growth potential. Automatic contributions are a way to take the pressure off you while also offering peace of mind that you’re actively working toward your objective, even if it’s all happening in the background.
Just as automating investment contributions supports long-term planning, automating loan payments helps you stay financially disciplined and make faster progress. At AutoPayPlus, we’re here to support you on your financial journey through automated accelerated biweekly loan payments. We help you free up money faster so you can start investing sooner. We also partner with TransUnion to provide our Members with credit monitoring, along with offering a host of other products and services to help Members stay financially healthy. Want to learn more about how AutoPayPlus can help you simplify your finances? Contact us online for more information!
