Put Your Investments on Autopilot

March 29, 2012

Whether you’re saving for retirement or for a child’s college education, a great way to stay on track and to build wealth is to set up an automatic investment plan (AIP).

When you sign up for an AIP, cash is electronically transferred each month from your bank checking or savings account into your investment account.  When the cash is deposited into your brokerage account, it goes to whichever default money market fund you’ve selected.  Then, you can put this additional cash to work during the course of your monthly Upgrading by putting it toward a mutual fund purchase.

The chief benefit of an AIP is that it keeps you investing consistently, regardless of market direction.  One of the keys to investment success is to follow persistent behavior patterns.  New York Times financial blogger Carl Richards made a wise observation recently in a recent Bucks Blog post, Your Mistaken Belief in Financial Willpower: “If you’re trying to eat well, you don’t bring a box of donuts home. So if you’re trying to save $100 a month for your child’s education, don’t force yourself to remake that decision every month.  Automate it.”

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