Automated investing is one of the smartest and most efficient ways to build wealth over time. It allows you to invest consistently, minimize emotional decision-making, and take advantage of compound growth — all without needing to constantly monitor the markets.
Whether you’re just starting your investing journey or already managing a diversified portfolio, automation ensures that your money keeps working for you behind the scenes. This guide will walk you through how automated investing works, how to set it up, and which platforms or strategies best fit your financial goals.
What Is Automated Investing?
Automated investing is the process of setting up automatic transfers of money into your investment accounts and letting technology handle the rest — from selecting investments to rebalancing portfolios.
Think of it as “autopilot for your finances.” Instead of manually deciding when and how much to invest, you predefine the rules — such as transferring a portion of each paycheck — and your chosen platform executes the plan consistently.
For example, imagine every time you get paid, a fixed percentage automatically moves into your investment account. The platform then allocates the funds into diversified assets such as ETFs, mutual funds, or stocks. Over time, these steady contributions lead to long-term growth, even through market ups and downs.
Why Automated Investing Matters for Beginners
Many new investors struggle with procrastination or forget to invest regularly. Automated investing solves that behavioral challenge by turning good financial habits into automatic actions.
It also helps you avoid market timing mistakes — since investments happen on a set schedule, you benefit from dollar-cost averaging, buying more shares when prices are low and fewer when prices are high.
Over the long run, this approach reduces the emotional stress of investing and encourages steady wealth accumulation.
How Automated Investing Works
Automated investing functions similarly to automatic bill payments. Once you set it up, funds move from your checking or savings account into your chosen investment account on a recurring basis.
Here’s a simplified breakdown of how it works:
-
Select your funding source – Typically your paycheck, checking, or savings account.
-
Pick your investment destination – This could be a retirement plan (like a 401(k)), a robo-advisor account, or a self-directed brokerage account.
-
Choose your investments – ETFs, index funds, or prebuilt diversified portfolios.
-
Set your schedule – Decide how often (weekly, monthly, etc.) and how much to invest.
-
Monitor periodically – While automation handles the routine, reviewing your strategy occasionally ensures your investments still match your goals.
Once the plan is active, your money grows automatically. This is especially powerful because it reduces the temptation to “pause” investing during market volatility — and may even allow you to benefit from buying at lower prices.
Common Types of Automated Investing
There are multiple ways to automate your investments. Here are the most common strategies available to both beginners and advanced investors:
1. Robo-Advisors
Robo-advisors such as Betterment, Wealthfront, Fidelity Go, and Schwab Intelligent Portfolios are popular for new investors. These platforms use algorithms to design and manage diversified portfolios based on your financial goals, time horizon, and risk tolerance.
Once you link your bank account and schedule automatic transfers, the robo-advisor invests and rebalances your portfolio automatically. Some also offer access to human financial advisors for personalized guidance.
2. Employer-Sponsored Retirement Plans
If your employer offers a 401(k), 403(b), or 457 plan, you’re already using an automated investment system. You simply choose what percentage of your paycheck goes into the account, select your investment funds, and the rest happens automatically.
Many employers also offer matching contributions — essentially free money — making this one of the most effective ways to build wealth passively.
3. Dividend Reinvestment Plans (DRIPs)
With a Dividend Reinvestment Plan, your dividends and capital gains are automatically reinvested into the same asset instead of being paid out in cash. This reinvestment helps your account grow faster through compounding — your earnings start generating their own earnings.
4. Recurring Bank Transfers
You can set up automatic recurring transfers from your checking or savings account into your investment account. For example, every month, $500 could be transferred into your brokerage or retirement account. This method is flexible and works well for self-directed investors managing their own portfolios.
5. Micro-Investing and Round-Up Apps
Apps like Acorns and Stash allow users to invest their spare change. Each time you make a purchase with your linked debit or credit card, the app rounds up the transaction and invests the difference.
While this won’t make you rich overnight, it’s an easy way for beginners to start investing without feeling a financial pinch.
What You Need to Open an Automated Investing Account
Before opening an automated investment account, you’ll need some basic information:
-
Full name and contact details
-
Social Security number or Tax ID
-
Proof of identification (driver’s license or passport)
-
Employment and income details
-
Investment goals and risk tolerance
Some platforms may also ask whether you are affiliated with a brokerage or financial firm.
Minimum Deposit Requirements
Automated investing platforms have different minimums. Some, like Fidelity Go or SoFi Automated Investing, require no minimum deposit, while others — such as Empower — may require up to $100,000 to access premium advisory services.
Beginners should start with low-minimum or no-minimum options. Even small, consistent contributions can compound into significant wealth over time.
Key Factors to Consider Before Automating Your Investments
With dozens of platforms available, consider the following before choosing one:
1. Fees and Commissions
Lower fees mean higher long-term returns. Always check for management fees, fund expense ratios, and hidden costs. Many robo-advisors charge between 0.25%–0.50% annually.
2. Customer Support
If you value human guidance, choose a platform with responsive support or access to financial advisors. Some robo-advisors operate entirely online with limited live support.
3. Account Minimums
Ensure the account minimum fits your financial situation. Some platforms may require a higher balance to unlock advanced features.
4. Research Tools
If you prefer a self-directed approach, look for platforms with strong analytical tools, screeners, and educational resources.
Is Automated Investing a Good Idea?
Absolutely — automated investing is ideal for almost everyone, especially beginners.
Behavioral finance studies show that investors often make emotional decisions that hurt long-term returns. Automation eliminates that bias by enforcing disciplined, regular investing.
By automating contributions, you invest before you spend, ensuring your future financial goals take priority over short-term wants.
Is Automated Investing Risky?
All investing carries risk, including loss of principal. However, automation can actually reduce emotional and timing risk.
Through dollar-cost averaging, you automatically buy more shares when prices are low and fewer when prices are high — effectively capturing market volatility to your advantage.
Are Micro-Investing Apps Worth It?
Micro-investing apps are great for beginners who want to start small. However, if you only invest spare change, growth will be slow.
For example:
-
Investing $50 per month for 10 years at a 7% annual return = $8,704
-
Investing $400 per month at the same return = $69,637
Small steps matter — but scaling up over time multiplies your results.
Should You Use an Automated Investing Platform?
Yes. Automated investing saves time, builds consistency, and leverages the power of compound growth. It also removes guesswork and ensures that you stay committed to your long-term financial goals.
If your goal is to grow wealth steadily with minimal effort, automation is one of the most effective strategies available.
Conclusion
Automated investing transforms good intentions into consistent financial action. By using technology to handle the repetitive parts of investing — contributions, allocation, and rebalancing — you can focus on what matters most: setting goals and letting your wealth grow over time.
Start small, stay consistent, and let automation work for you.
Learn more about investing strategies and financial growth tips at 1nvestopedia.com.
FAQ
1. What is automated investing?
Automated investing is a strategy that uses technology to invest your money automatically based on your goals, risk tolerance, and preferences.
2. How do I start automated investing?
Choose a platform (like a robo-advisor or brokerage), link your bank account, decide your investment schedule, and automate regular contributions.
3. Are robo-advisors safe for beginners?
Yes. Reputable robo-advisors are regulated and use encryption to protect your data. They also provide diversified portfolios suited for beginners.
4. Can I lose money with automated investing?
Yes, all investments carry risk. However, automation helps minimize emotional decision-making and encourages consistent long-term investing.
5. How much money do I need to start?
Many platforms allow you to start with as little as $0–$100. The key is to begin early and invest consistently.
6. Do I need to monitor my automated investments?
Not daily, but reviewing your portfolio quarterly or annually ensures your allocation still aligns with your goals.
7. What are the best automated investing platforms?
Popular choices include Betterment, Wealthfront, SoFi, Fidelity Go, and Schwab Intelligent Portfolios — all great for beginners.