5 Key Steps to Starting Your Systematic Investment Plan Today

You probably know you should be investing, but you might not know where to start. Fortunately, the process is easy. After all, you’re setting up an automatic process, and you don’t need a large amount of money to begin. In fact, establishing a systematic investment is almost as easy as opening a high-yield savings account (HYSA), Roth IRA, or an online broker account.

What Is Systematic Investment?

A systematic investment plan (SIP) involves making regular contributions to some type of financial account, like a 401(k), mutual fund, or brokerage account. When you set up a systematic investment plan, you select your risk tolerance by choosing whole or fractional shares of the investments you think best align with your goals.

Understanding Your Financial Goals

Before you open an account or establish a contribution schedule, take a minute to define your goals for the account. For example, you might be saving for a short-term goal like purchasing a vehicle, paying for a vacation, or saving for a long-term goal like retirement.

Knowing your financial goals will allow you to determine the account and investment you need for your portfolio. If you are more conservative, a HYSA may suffice, but a brokerage invested with stocks, ETFs, or mutual funds may be more beneficial for more aggressive investors.

How to Start Your Automatic Investment Plan

• Evaluate your financial goals: Simply put, you should figure out what you’re saving for, how much you’d like to save, and when you need the funds.
• Choose the right investment account: Certain accounts are used for specific purposes. Look for accounts that match your needs and financial goals. For example, if you want an automatic investment plan for retirement, you might choose your workplace retirement fund or open a SIMPLE IRA if you’re self-employed.
• Set up automatic contributions: Once you’ve selected an account, fund it from a linked checking or savings account, or have the money withdrawn from your paychecks. You can specify how much you’d like to contribute as a set amount or a percentage (if you fund through your paycheck).
• Select your investment strategy: You’ll also have to specify how often funds are invested in your account. If you’re participating in an employer-sponsored retirement account, you might want to invest often enough to get the company match.
• Monitor your investments: While you can step back and let the systematic investment plan do its thing, it’s still a good idea to monitor your portfolio and make necessary updates if your financial goals change.

The Bottom Line

A systematic investment plan should make it easy to save for your financial goals. While there are a few things you need to figure out to set up a plan, once you do, funding your account is really straightforward. The best thing you can do is to get started today.