Automated Investment
A true visionary attempts to choose the "right day to invest a sum in the market
. The long-term investors have more incentive to use a Automatic investment plan better known as SIP.Most investment trusts allow investors to take smaller amounts regularly for as little as $ 50 per month on their payroll or bank account to invest in (s) of mutual funds of their choice. Not only the systematic investment is an excellent way to establish an investment discipline, but it also eliminates the uncertainty of the timing for doing so. Indeed, given that their purchases are spread over many market cycles, investors need not fear to invest at the wrong time.
Let's look at the following two steps any investor can do to unleash their automatic investment process:
Preauthorized Payment Program (PPP)
A program of pre-authorized payments (PAP) can invest regularly in mutual funds. Mutual fund companies automatically take money from a bank account to buy shares or funds of your choice. Investors indulgence in this money transfer is only limited to preauthorizing their bank to make scheduled payments to mutual fund company/ies of fixed day of every month. Every month the money gets debited form the account without any hassle and in turn the mutual fund units are purchased. The asset column gets heavier each month effortlessly. I call this form of investment as automatic investment.
For an initial and subsequent investment of say $ 50, it is possible to make payments bi-monthly, quarterly, or annual or any day of the month. At the same time, the investor is free to change the investment amount, payment frequency or the distribution by fund or to terminate the program, provided written notice of only 10 days.
Systematic Withdrawal Plan (SWP)
A Systematic Withdrawal Plan (SWP) allows investors to make systematic withdrawals from their account. They may periodically sell shares of their funds until they decide to modify the program or terminate it. This completes the cycle of automatic investment, in PPP you have done automatic planning to buy mutual fund units (cash out flow) and in SWP one plans to sell mutual fund in the same gradual way (cash out flow). It is logical to assume that a person who has already accumulated sufficient mutual fund units and would like to take advantage (cash in flow) by selling gradually each month. It is possible to plan to sell units bi-monthly, quarterly, or annual or any day of the month.
by: David