The Power of Automatic Investing

One of the easiest and most efficient ways to invest in mutual funds is through automatic investing. Utilizing the process of dollar-cost averaging, automatic investing is a simple term for a type of mutual fund installment-purchase plan and is one of the best ways to grow your investment over time.

In an automatic investing plan, you agree to automatically invest a specific amount of money each month in the same mutual fund. Many companies allow you to participate in an automatic investment plan for as little as $50 per month. Find funds for $50 or less and get started.

The chart illustrates how dollar-cost averaging through automatic investing can work for you.

Monthly investments of $100 purchased a total of 44 shares in this simplified illustration. As the fund's price fluctuated between $10 and $12.50 a share, more shares were bought as the price declined. The investor earned a 10% profit although the initial and closing net asset values were the same, because its average cost per share was lower than the final value per share.

Dollar-cost averaging does not ensure a profit, protect against a loss in declining markets or against a loss if you stop the program when the value of your account is less than its cost. You should consider your financial ability to continue making purchases through periods of low price levels. There is no method of investing that can guarantee a profit if you should decide to sell at the bottom of the market, and the potential for high return on your investment is increased with your long-term commitment to dollar-cost averaging.

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