The Importance of Auto-Investing
A regular habit of saving and investing is critical for achieving financial independence. Yet, setting aside money regularly can be challenging. This is where automatic investing, or auto-investing, comes into play. It simplifies the process by automating the investment routine, making financial growth more accessible and less time-consuming.
Understanding Auto-Investing
Auto-investing is similar to automatic savings programs. These programs allow you to set up regular transfers from your checking account to your savings account. For instance, some apps like NOMI and Moka help you save effortlessly. NOMI identifies funds you’re unlikely to spend, and Moka rounds up purchases to save and invest the difference.
How Auto-Investing Works
Consider using a robo-advisor for auto-investing. For example, you can set a transfer of $500 each payday to your investment portfolio. Once transferred, it’s automatically invested based on your chosen strategy, like growth-oriented ETFs. This system ensures funds are not just transferred but also strategically invested without manual intervention.
Benefits of Auto-Investing
Regular deposits into your investment account are essential for building a robust portfolio. Auto-investing helps enforce this discipline by automating the process. It leverages dollar-cost averaging, where you invest a set amount regularly, regardless of market fluctuations. This reduces emotional decision-making and potential costs, fostering a solid investment habit.
Available Auto-Investing Tools
- Moka: Rounds up purchases and invests the difference into ETFs. It simplifies investing by finding spare change and offering weekly contributions for a flat fee.
- Questrade Auto Invest: Allows automatic deposits into a diversified ETF portfolio tailored to your risk tolerance and goals.
- Wealthsimple Invest: A user-friendly robo-advisor that invests in ETFs based on your risk profile. It offers free ETF and stock purchases, making it ideal for buy-and-hold investors.
Conclusion
For those who prefer a hands-off approach to investing, auto-investing provides an efficient way to grow wealth. It ensures your savings increase with minimal effort, supporting your long-term financial goals.
