Why Didn’t I Automate My Investments Before Now?

by Kevin on June 28, 2012

You know what is not fun?

Worrying about your investments. Fretting over decisions. Having anxiety when the market goes up, down, and sideways.

Not fun at all.

I used to do that. In fact I did it for several years. Until this year. And man, what a difference it has made for me.

The Beauty of Automating My Investments

I’ve been using a Roth IRA for more than four years now. I first opened my account with Vanguard back in early 2008 at the ripe young age of 23. Throughout that time — and adding my wife’s Roth into the mix — I manually went to Vanguard’s website to let them know to withdraw money from my account. That meant twice per month (whenever I remembered) I had to login to two accounts, type in how much of a contribution we wanted, and click submit.

It wasn’t burdensome, but it was kind of annoying. And admittedly, it also led to me trying to avoid or enjoy swings in the market. “Ooo, the market tanked 150 points. Maybe it will go down more tomorrow, so I’ll login tonight to send in my contribution.” (Vanguard’s Roth IRA investments are done at the end of the next business day.)

This year after tax day I decided to switch to an automatic investment plan… and I love it.

Why Change to Automated Now?

When we first got married we used a little trick to buy ourselves some time to fund our Roths in full the first year. With a Roth IRA you get to put money in for a given tax year all the way through April of the following year (whenever tax day is). So when we opened our accounts in early 2008, we technically had until April 2009 to fully fund them. This made funding the first year a bit easier on the budget.

Of course that also meant that the next year we only had 12 months to fund that year: from May 2009 to April 2010. We’ve stuck with that schedule since.

I hadn’t switched to automated because I thought I looked at Vanguard’s options once and it wouldn’t let me decide how much money I wanted to come out if I wanted to fully fund the account. It was trying to cram the full $5,000 contribution into the May to December timeframe. I didn’t want that so elected to just do everything manually, grumbling along the way.

I decided to check again recently only to discover that either I was wrong and hadn’t found the right option, or Vanguard updated their options. I can now elect to invest a given amount each month, regularly, until the end of time if I like.

And that’s what we just did.

(Side note: It’s weird that it took me this long to change, too. My 401k automatically invests and I know how nice that is… then again, I never had to manually invest my 401k either, so I never felt the pain that was relieved through automation.)

What Automatic Investment Feels Like

I only log in to Vanguard’s website once per month now to check our account balances. I use them in our net worth calculations. It’s a lot fewer clicks, I just log in and look for the big number of the balance of the account.

I don’t worry about market swings now. I shouldn’t have in the first place, but now I know that twice per week (once for each Roth IRA on separate days) we’re going to have some money getting invested into the market.

I’ve also saved a ton of time. It’s a task to take off of my mental checklist which arguably is probably the best part. No longer having to mentally remind myself to do something twice per month has been huge.

In the future we could even very slowly increase how much goes out every month so we can get back to more of a regular January to December timeframe. Not a big deal either way, but something to consider.

Do you automatically invest? What sort of change did you feel?


Derek June 30, 2012 at 10:26 am

Automation is great when you are young and are making regular contributions – taking advantage of dollar cost averaging and just putting your money to work. However, as you get closer to retirement the more active you or your professional advisor should be with your investments. Great post!

BryanM July 3, 2012 at 8:29 pm

I always like to automate things so its one less thing to worry about. The only thing that worries me about automation with my finances is things can easily get overlooked and mistakes can be made. For example, I’ve automated the paying of my credit card bills, but one time a month ago, I realized that a charge at a restaurant was inputted incorrectly, and I had to quickly scramble to call my bank/credit card company to get it fixed. Little things like this every once in awhile get me paranoid.

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