How to Buy Mutual Funds Automatically

Many of us don’t have to monitor the stock market nevermind spending time researching it. This is where mutual funds are so great, you get a professional fund manager that works for a credible financial institution that most likely has a track record with some success. If you don’t have time to invest but still want to invest, then you should definitely look at investing in mutual funds.

Choosing the Type of Fund
First things first, you need to consider what kind of fund you are going to invest in. Do you want something really safe like a Money Market or a T-Bill fund? Or do you want something that provides income such as a Fixed-Income or a Corporate Bond fund? Or do you want equity exposure and want to buy a mutual fund that invests in stocks of stock markets around the world?

It really depends on your risk tolerance and how much you can deal with the ups and downs in the market. The more risk, the more volatility you will see in your mutual funds and but the greater the potential returns that you will see. So think it through before you buy a fund.

Choosing the Fund Company
A reputable firm will most likely be the safest but won’t necessarily guarantee the best returns. Just because a fund manager works for a major bank or investment firm, doesn’t mean they can consistently beat out the markets. However, if the firm is large, it could mean that the management fee could be lower than other firms. Management fees are something you should definitely consider when you are looking for a mutual fund since a couple percent could make a big difference in the long run.

Investing Automatically
To invest in mutual funds, you will need an account with a brokerage firm. Any brokerage firm will do, and most of them should let you setup automatic contributions from your bank account. Just like an automatic savings plan, this will help you stay disciplined in investing your money for your financial future.

Usually you can choose the amount you invest. Once you invest the initial amount which could be anywhere from $500 to $5,000 or more you should be able to invest in small increments ranging from $25 to $100. This isn’t too much and you should be able to invest a small amount every paycheque.

Dollar-Cost-Averaging
By being able to invest your funds automatically you are essentially dollar-cost-averaging your trades and creating wealth at the same time. You will buy at the lows and highs of the market and average out your cost base and when the time comes (if ever) to sell the mutual fund you should be looking pretty good especially in a bull market.

Mo2 Thinks
Automatic investments plans are an integral part of being financially responsible. It can help you understand what a few dollars can do in the long run if you invest it consistently. If you can stay disciplined without touching the money that you invest, you will definitely come out on top in the long run. Especially with the times that we are going through now, if you can put away money in the deeply undervalued stock markets, you could potentially come out with huge gains in the years to come, while racking in decent dividends, if you buy stocks with decent dividends.