What is Automatic investment plan ?
Definition of Automatic investment plan
The automatic investment plan is a program of investment that encourages investors for regular contribution into a fund of nominal amounts such as $30 per month at fixed intervals. Automatic deduction of funds is made from the investor’s paycheck or savings account and invested in a mutual fund or a retirement account.
Dollar- cost averaging is another name for regular automatic investment and is considered as the best investment plan for the investors having long-term objectives.
Brief Explanation of Automatic investment plan
Under automatic investment plan, the same amount is invested at regular intervals by the investor irrespective of change in stock prices whether rising or fall. Through this strategy, more shares can be bought by the investors at lower prices and fewer shares at higher prices.
Regular investing in a program like automatic investment plan can help reduce the emotion involved with investing particularly when markets turn volatile because you normally do not change your strategy for a long-term period. No drastic adjustment is required to be made in your plan. In actual, caesura to invest when the market is declining might end in selling at low prices or losing the opportunity to supplement a portfolio when prices are reduced.