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Start Investing & Save Money the Easy Way

If you want to start investing to get ahead or to start saving money for a rainy day an automatic investment plan is a good and easy way to do it and make money in the process. Now, do you want a savings plan, or a retirement plan? Maybe you just want your own investment fund for some special purpose.

No matter what your financial goal, investment companies can help you save money and make money through an automatic investment plan. Very simply, they set you up so that money is automatically transferred from your bank account to them every month (no charge).

These investment companies are better known as mutual fund companies or fund families. To avoid sales charges go with a major no-load fund family like Vanguard, Fidelity or T. Rowe Price. Their investment plans do not involve a contract, they are simply an arrangement. A minimum investment may be involved, so ask for information.

Now let’s get specific. Say you want to set aside $200 a month in an investment fund. These fund companies offer a wide variety of funds to choose from. Do you want safety, income or growth?

Or, you want to set up your own retirement plan and contribute $400 a month. What kind of account do you open and which of their funds should you invest in?

Let’s start with saving money to accumulate a cash reserve. You need safety here, so go with a money market fund and possibly short-term bond funds as your savings plan.

If your investment plan has a time horizon of several years (like for college expenses in 5 to 10 years) consider adding some intermediate-term bond funds and a little in stock funds to the above.

If you want to set up a retirement plan of your own, open up a traditional or Roth IRA with the fund company. You will have money market funds, bond funds and stock funds to choose from; the latter being growth oriented and riskier than the other two.

If you really want to make money and are willing to accept some risk start investing vs. just saving money. For short term goals, saving money is best because safety is paramount. However, if you have a longer-term time horizon start investing in stock funds and bond funds.

Here’s another advantage of the automatic investment plan. You have a set amount of money each month flowing into your investment plan. When stock prices are low this money will buy more shares in a stock fund. When prices are higher you automatically buy fewer shares. This reduces your investment risk and works to lower your average cost per share.