Automation makes investing easy
Zoomer | January 1st, 2006
Investors who want to practice an important rule of saving and investing – that is, paying yourself first (or treating investing like paying a bill) – may want to make use of one or more of the many pre-authorized plans available at many financial institutions. In addition to the benefits of dollar-cost-averaging over the long term, these plans can simplify your life and free up more of your time.
Here are some popular options:
- PACs – Pre-authorized contributions that allow a specific dollar amount on a periodic basis – monthly or bi-weekly, for example – to be withdrawn from your bank account and placed in an investment account. In this way, your money will compound at a faster rate by making regular deposits throughout the year, rather than having to come up with a lump sum deposit at year end.
- SIPs -– SIPs and PACs usually work together. A systematic investment plan takes a specific dollar amount (the PAC) -– usually on a monthly basis -– from your investment account and invests it in a pre-planned specific mutual fund or funds. This process allows for the benefits of dollar cost averaging.
- SWIPs — Systematic widrawal plans are the opposite of a SIP. When assets are accumulated in investments such as mutual funds, investors often want to draw a regular income from their accumulated investments, perhaps on a bi-weekly or monthly basis –just like a paycheque. Rather than worrying about the ups and downs of the market, investors can count on a regular monthly withdrawal to provide for their income needs, while still allowing the remaining capital to appreciate.