How Investment Plans Work
More people are choosing investment plans than ever before. With
the rising cost of living and the growing insecurity about the
availability of many retirement funds, many individuals are
looking to investment plans to begin a nest egg or to make some
additional money via investment without having to spend a lot of
time purchasing stocks and bonds.
Investment plans allow individuals to simply purchase a specific
amount of stocks, bonds, or indices on a regular repeating
basis, cutting out a large part of the hassle while allowing for
some of the main advantages of investment.
If you've been considering an investment plan but aren't
completely sure what they might entail, the following
information might help you to decide whether or not an
investment plan is the right investment option for you.
The Mechanics of an Investment Plan
Basically, an investment plan is a method of making multiple
investments over time at regular set intervals. The funds for
the investment are taken from a cheque, savings, or money market
account automatically, and are used to purchase stocks or bonds
that you have decided upon beforehand. In most cases you can
change the amount, frequency, or purchased stocks or bonds of
the automatic investments at any time, though depending upon the
broker through whom you're doing the investments you may be
subject to fees or penalties especially if changing details
relatively close to the next investment date. Most online
investment firms offer investment plans that you can change at
any time free of charge.
Deciding How Much to Invest
When deciding how much to invest each cycle with an investment
plan, you should take care not to overextend your funds and
bring yourself up short. Make sure that the amount that you
choose is available and that you'll have it to spare each time
your investment comes up... it can be difficult to plan for
events in the future, and just because you have a surplus now
doesn't mean that you won't find money running tight a few
investment cycles from now.
If you feel that you're reaching a point where you won't be able
to afford your regular investment, go ahead and reduce the
investment amount or put a hold on the next scheduled
investment... better to put less in than short yourself
afterwards.
Choosing What to Invest In
Making the decision of which stocks and bonds to invest in can
take some time, but it's worth it... this is your money that
you're dealing with, and you shouldn't invest it without putting
some thought and research into your decisions. Find stocks or
bonds that have performed well over time, and that are likely to
continue doing so... they may be expensive at times, but you
aren't making your total investment all at once so it doesn't
matter as much.
Don't be afraid to add new stocks or bonds to your plan later,
either... this can help to diversify your portfolio.
Deciding On an Investment Interval
You also need to decide how often you wish to make your
investments... this will largely depend upon the cycle of your
paycheques and your monthly bills and expenses. You may decide
to invest once per month, after everything has been paid, or you
might want to invest a little from every paycheque.
The more often you invest, the lower the amount of each
investment can be... after all, two or four small investments
per month might end up purchasing more than one larger one.
Decide on what works best for your lifestyle, and modify it as
needed later if it doesn't seem to work out for you.
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