Two of the major reasons why people just don’t invest are that they just don’t have the money and that investing is too risky. Investing in mutual funds using an automatic investment plan avoids these two issues and offers a great investment strategy for both expert and novice investors.
* The benefits of mutual funds
Mutual funds allow you to pool your risk by spreading your investment over several individual securities and funds. This means that by investing into a mutual fund you gain immediate diversification. The type of funds that you invest in will determine the actual specific makeup of your investments, allowing you to pool your risk over several sectors and industries or to focus on any one in particular.
When you purchase into a mutual fund you are also purchasing a professional money manager. The money manager managing your account is tasked with maintaining the balance of securities within your mutual fund. When looking at mutual funds one of the most important considerations is looking for a strong fund manager.
* The benefits of automatic investment plans
Automatic investment plans allow you to set up a specific investing schedule that will take advantage of the many benefits of dollar cost averaging. In a nutshell, dollar cost averaging is an investment strategy that establishes a specific dollar amount to invest over a specific time frame, building a portfolio on a regular basis.
Particularly if you do not have a large lump sum to invest, an automatic investment plan allows you to make periodic investments. This means that you do not need to break the bank in order to invest. You can invest as little as $25 periodically, slowly building your portfolio. Through some discount brokerages there is no minimum investment amount.
Combining these two investment strategies gives you the best of both worlds. You can make systematic, regular investments of even small amounts into a mutual fund where you will receive professional money management and instant diversification. As an investment strategy this will reduce your overall risk in the market and the small minimums allow even novice investors to take advantage of this plan.
If the idea of investing scares you, and in this market a lot of people are scared, this investment strategy is for you! Now is a great time to invest, don’t allow your fears or the fact that you don’t have much to invest, keep you from taking advantage of the discounted price of investing at this time.
Take advantage of this prudent investment strategy!