Investment guide

Your guide to understanding auto-investing

Auto-investing sounds very technical. But it’s not. It really means regularly contributing money to an investment platform to buy your chosen investment – this might be shares, bonds, ETFs or managed funds. Most people do this by setting up a regular automatic payment or direct debit into their investment. You may effectively already be doing this by contributing to your KiwiSaver each pay day.

Auto-investing is easy to set up. You have control over when and how much you invest. This is the beauty of it. Plus, you don’t have to check it all the time. Let’s get into the details.

What are the benefits of auto-investing?

There are many benefits that come along with setting up a regular automatic payment into your investments. Here are some of the benefits of auto-investing: 

1. Consistency: Auto-investing helps you maintain a consistent investment approach to help save for your future. 

2. Time-saving: Auto-investing saves time by removing the need to manually deposit money into your chosen investments. This can free up time to focus on other things – plus when life gets busy you have one thing less to do!

3. Reduced emotional involvement: Auto-investing can reduce the emotional involvement that comes with manual investing. Emotional reactions to market fluctuations can lead to impulsive investment decisions that may not be in your best interest.   

4. Dollar-cost averaging: Auto-investing can help you implement a dollar-cost averaging strategy. This strategy involves investing a fixed amount of money at regular intervals in your chosen investment option over a long period of time. The investment will go ahead automatically until you change the set-up, regardless of the price or market conditions.  This is a sensible strategy to manage risk – for example, to try to avoid investing a lump sum when prices are high. If you invest smaller amounts at a time, some at higher prices and some at lower, the price averages out.

Overall, auto-investing can help you maintain a consistent investment approach, save time, and potentially benefit from dollar-cost averaging.

Top tip: squirrel away some money each time pay day rolls around, that way you’ll know you’re quietly working towards saving for your future.

Is auto-investing right for me?

Auto-investing can be a good option for people, but whether or not it's right for you depends on your financial goals and personal circumstances. Here are some factors to consider:

1. Cash flow: Regular investing means you need to have money available. If you do not have a stable income or have trouble saving money, regular investing may not be the best option for you.

2. Investment Timeframe: Like any investment style, auto-investing is well suited to long-term investment goals. If you have short-term investment goals, such as saving for a holiday next year, then auto-investing may not be the best choice.

3. Investment Goals: If your goal is to build wealth over the long-term, then auto-investing could be a good fit for you. It allows you to regularly invest small amounts of money, which can add up over time.

4. Fees: Some investment platforms charge fees to auto-invest, which can eat into your returns over time. Make sure to read the fine print and compare them so you can make an informed decision. For example, when you invest with AMP there are no additional charges for setting up a regular, automatic payment into your investments.

Auto-investing can be a good option if you have long-term investment goals, are comfortable with the associated risks, and understand the fees and investment options offered to you. It's important to know that auto-investing isn’t right for everyone. If you have short-term investment goals or inconsistent cash flow, then auto-investing may not be the right choice for you.

All  investments come with some degree of risk, and auto-investing is no exception. You aren’t guaranteed to make money when you invest, and you might lose the money you start with. It's important to assess your risk tolerance and choose an investment strategy that aligns with your comfort level. 

Ready to start investing?

Many of us are always looking for ways to set ourselves up financially for a comfortable future. Regular investing is a good place to start. We work hard for our money, so why not have our money work hard for us too? At AMP, we offer a range of investment options that may suit you. AMP Managed Funds and AMP KiwiSaver Scheme both offer auto-investing at no extra cost, and you can invest as little or as much as you can afford.

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This article doesn't provide financial advice on your investment choices. Any information we provide is general only and current at the time. You should consider seeking advice when considering whether an investment is appropriate for your objectives, financial situation or needs.