3 Ways To Leverage Automation To Make Investing Less Stressful

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Investing doesn’t need to be another stressor in your life. God knows there’s enough of them.

But it often is. Money is a top cause of stress for Americans, especially as of late. Finder’s Consumer Confidence Index shows that 77% of Americans say they’re stressed about their current financial situation. The last few years have been tough, so it’s understandable why.

In June 2022, inflation hit its highest level since the 1980s, and with it lifted the cost of basic essentials like milk, eggs and gasoline to new decade highs. Meanwhile, looming recession, anxiety around job cuts and market volatility have created a difficult landscape for individuals to navigate financially.

For many, money and stress go hand in hand. And in times when inflation and higher costs of living cultivate a scarcity mindset, investing your money with the hopes, not guarantee, that it’ll grow in value can be a difficult ask.

But it’s a hurdle many are scaling.

Most Americans want to invest – many just don’t know where to start

A recent study by Stash Financial shows that an impressive 90% of Americans want to grow their wealth. The problem? Almost half don’t know how to get the ball rolling.

According to Stash, just under half (45%) of those currently investing in tax-advantaged retirement accounts, such as a 401(k) or an individual retirement account (IRA), said that they don’t have a firm grasp on those investments. They don’t fully understand them. Meanwhile, 69% of Americans have no brokerage account for non-retirement investing. This is echoed by Finder’s survey of US consumer attitudes and trends on wealth and savings, among other topics, which shows that more than half (55%) of Americans have never invested in stocks outside of retirement plans.

Is it an unwillingness to participate in the stock market? It doesn’t seem to be. It appears that many Americans are simply lost when it comes to investing on their own.

Trouble Getting Started Investing? Invest Passively

Today, investing is more accessible than ever before. Mobile trading apps let nearly anyone with a phone access the markets, while the emergence of new online brokers has driven costs significantly lower. What’s more, a growing number of these brokers leverage today’s cutting-edge technology, and it’s helped make investing simpler and less intimidating.

If you’ve been avoiding investing because you aren’t sure how to get started or how to manage your portfolio, you’re not alone. Goldman Sachs’s 2022 Retirement Survey & Insights Report shows that 64% of working individuals are stressed about having to manage retirement savings.

But you don’t need to know how to trade stocks to be a successful investor. Warren Buffett, one of the most successful investors of all time, recommends most retail investors stick to index funds. An index fund is an exchange-traded fund (ETF) or mutual fund that is designed to mimic the composition and performance of a market index. For example, the Vanguard 500 Index Fund ETF, one of the two index funds Buffett’s holding company Berkshire Hathaway invests in, is designed to closely track the return of the entire S&P 500.

3 Ways To Leverage Automation To Make Investing Less Stressful

Automating your investing can help relieve some of the stress that comes investing. It reduces the amount of time you have to spend researching and choosing investments and reduces the burden of remembering to put away money each paycheck, helping to keep your investing schedule on track.

Here are three ways to leverage automation to make investing easier.

1. Robo-Advisors

Artificial intelligence (AI) is a hot topic as of late, and it’s been fueling the stock market’s rebound over the past five months. The NASDAQ, driven by a handful of the top players in the AI industry, is up 21% so far in 2023.

Companies have been using AI to provide ordinary investors with automated investment strategies for more than a decade now. The first robo-advisor, Betterment, was launched in 2010.

Robo-advisors are a class of financial advisors that employ algorithms to suggest, build and manage investment portfolios, and they continue to grow in popularity. Importantly, they don’t require in-depth market knowledge.

Here’s how they work:

  1. During the signup process, you provide information about your investment goals, time horizon and risk tolerance.
  2. Based on your responses, the robo-advisor recommends a portfolio, usually of ETFs.
  3. The robo-advisor monitors and automatically rebalances your portfolio based on your goals.

Robo-advisors charge an annual management fee that’s a fraction of that of which a human financial advisor charges. Some, such as SoFi’s Automated Investing account and M1 Finance, charge no management fees whatsoever.

Robo-advisors combine automation with low-cost, passive ETF investing for the ultimate set-it-and-forget-it investing experience.

2. Automatic Recurring Deposits

Most brokers offer an option for recurring deposits, which removes the burden of having to remember to regularly fund your account — a frequent obstacle for many. Connect your bank account, choose your deposit frequency and enter a contribution amount.

Recurring deposits are helpful in that they automate the funding process, but you still have to invest that money once it’s in your account. But you can keep it simple by investing in index funds, as I discussed earlier. That is unless the broker offers an automatic investment plan.

3. Automatic Investment Plans

Many brokers also let you set up automatic or recurring investments. Some brokers, such as Charles Schwab, only offer this service for mutual fund investing, while others, such as Robinhood, let you invest automatically in stocks, ETFs and crypto.

Either way, the process is typically the same: choose the asset and the amount, a start and end date, frequency and payment method. Similar to recurring deposits, this feature lets you put your investing on autopilot.

Bottom Line

Investing, like anything related to money, can be stressful. But leveraging automation can maybe remove some of that tension.

Automating your investments can remove the burden of having to remember to deposit cash each month, choosing your investments and managing your portfolio. And, hopefully, let you spend more time and energy on other important things.