Using Automatic Withdrawal to Build Your Fortune

Automatic Withdrawal

An automatic withdrawal is a tool that allows you to specify a certain amount of money to be deducted from your bank account on a regular interval. The money from your account will then be transferred to a retirement account or a brokerage account. You could potentially decide to have the money deducted every week, every month, or on some other regular interval schedule. This withdrawal is going to happen automatically without any intervention from you.

Automatic Investing

The big benefit of using this tool is that you are going to be able to invest automatically without thinking about it. One of the big problems that many people face is that they cannot discipline themselves to invest regularly. They periodically think about investing from time to time and put a few hundred dollars into their brokerage account. However, by taking a haphazard approach like this, you are not going to be very likely to create large amounts of wealth. By using automatic investing, you are essentially going to be forcing yourself to set aside a certain portion of your income for investments.

When you do not have to consciously think about investing, you are going to be much more likely to let the process go through. If you have to make a decision every time that you want to invest, there is a good chance that you will not get around to doing it. There is always something more important that is calling for your available funds. Because of this, most people end up spending the majority of their cash on other things instead of putting it into investment accounts.

Dollar Cost Averaging

Another big benefit of using automatic withdrawal is that you are going to be able to benefit from a time-honored investment strategy called dollar cost averaging. Dollar cost averaging is investing a regular sum of money on an interval schedule. You are going to set aside a certain portion of your income to buy investments regularly. For example, you might decide to take $500 per month and purchase shares in a particular mutual fund. 

By doing this, you are going to be able to ignore the impact of market fluctuations. Even though the price of the security is going to be moving up and down over time, you are still going to be investing the same amount of money. This means that you are going to buy fewer shares when the price is high. You are also going to buy more shares when the price of the security is low. This means that you will be able to level out your investing and increase your effectiveness as an investor. 

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