About Self-Funding Investment Accounts

Through the use of investment firms and online investing websites, the opportunity to invest money in stocks and bonds is available to more people than ever before. In addition to simply being able to invest, many of these firms and online brokers offer up various degrees of automation in order to help investors increase their holdings without the need to spend a significant amount of time actively making investments. Of particular use to investors who wish to make regular investments is the self-funding investment account, which automatically transfers money from other accounts and invests it according to account profile settings.

Function

Self-funding investment accounts are created to help ensure that a specific amount of money is made available for your investments on a regular basis. The account will automatically schedule a funds transfer for an amount that you specify, often investing it into specific stocks or bonds once the transfer is complete. The settings of the self-funding transactions can be adjusted to coincide with your payday or the frequency that you desire for these automatic transactions; you can select both the day of the week and how many weeks should go between each transfer.

Types

There are two major types of self-funding investment accounts: those that automatically invest the money once the transfer is completed and those that store the transferred funds in a money market account until you manually choose the investments that you wish to make. If your investment account automatically invests transferred money, you can adjust the stocks and bonds that are invested in at any time should you wish to diversify or change the amount invested in each stock.

Features

In addition to allowing you to customize the amount and frequency of automatic transfers, most self-funding investment accounts feature an interest-bearing money market account that is used to hold the funds until they are invested. Dividends from your investments will be paid into this fund as well, though you can choose to have your account automatically reinvest these dividends to help your stock holdings grow even further. Should you wish to skip a specific transfer, the majority of self-funding accounts will give you the option to suspend transfers on a case-by-case basis (meaning that only the specified transfer will be skipped so that all future transfers will proceed like normal).

Benefits

A self-funding investment account can be ideal for those individuals who want to invest but either forget to fund their investment account or who just never seem to get around to buying stocks. Being able to set up automatic transfers from a checking or savings account allows you to make your investments on a schedule while you avoid having to manually fund your investment account before each transaction. The option to automatically invest and to reinvest dividends can help you to keep your stock portfolio growing without you having to specifically track your stocks and choose each investment. Filters can often be placed on self-funding accounts to prevent them from purchasing stocks above a price that you specify as well.

Warning

Caution should always be taken when making investments in the stock market since fluctuations in stock prices can cause you to lose a lot of money. Just because an investment account is self-funding and can automatically make investments doesn't mean that you shouldn't keep an eye on the performance of any stocks that you own. By watching for trends and keeping an eye on the value of your own investments, you can increase your performance as you adjust investment amounts to buy more of stocks that are due to rise and fewer of those performing poorly.