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Automatic Investor FAQs

Posted by | March 2, 2014 | Software | No Comments

Frequently Asked Questions

If you don’t find your answer here, stop by our User’s Group. It’s jam packed with useful information and you can post your own questions.

Q: If I have more than one stock in my portfolio, which one should I sell when Automatic Investor recommends I sell some shares?

A:You can choose to sell whichever one you want. Automatic Investor will recommend you sell a specific dollar amount of equities. It will also calculate how many shares of a particular equity you must sell (at its current price) in order to meet this dollar amount. You can see this advice by selecting the equities in your portfolio one after the other. As long as you sell the correct dollar amount, it doesn’t matter whether you choose equity A or equity B. In fact, you can choose to sell a portion of equity A and a portion of equity B (as long as the sale results in the dollar amount Automatic Investor recommended). The same holds true if Automatic Investor recommends you buy equities.

Interestingly enough, this feature gives you the ability to diversify your portfolio and practice asset allocation techniques. If an equity in your portfolio has outperformed the others, you may want to rebalance by continuing to sell the outperformer (as Automatic Investor directs) until it makes up the desired percentage of your portfolio. Similarly you can rebalance by buying specific equities when Automatic Investor gives buy advice.

Automatic Investor also allows you to swap one equity for another, as long as the total value of the equity portion of your portfolio doesn’t change. So you could sell $5000 worth of Microsoft, for instance, and buy $5000 worth of IBM at anytime.

There are times when you might want to do this because the fundamentals of a stock (or the industry it’s in) has changed, there is trouble in the company, the stock has not fluctuated like you thought it would (recall that volatility is the key to superior returns), or you simply find a better company.

Q: Should I be in or out of the stock market?

A: You should be in the stock market if you are investing for retirement or other long-term goals and have at least 5 years to go. Historically, the stock market has beaten other investments, including bonds, during 10-year periods. If you will need your money in the near future (or aren’t comfortable with volatility), you should consider moving the bulk of your investments to less volatile, or guaranteed, financial instruments (such as T-Bills and guaranteed bonds).

Q: What stocks should I pick?

A: If you’re just starting out in the investment game, you may want to consider putting your money into an equity based mutual fund that is compatible with your goals and risk tolerance. A good mutual fund will diversify your investment and professionally manage it. Of course there are costs associated with this, typically for management fees and fund expenses. Automatic Investor will manage your mutual funds just as easily as it manages individual stocks. However, mutual funds may be more difficult to sell (and there may be additional charges if you sell within a specific time frame). Ensure you find out ALL the details.

As you learn more about investing in the stock market, you might want to try choosing a few stocks for your portfolio. Keep in mind that choosing good companies really does require knowledge and experience. So take it slow at first (don’t put all your money into one stock), take a few investment seminars, and read everything you can get your hands on. The Internet is a prime resource.

Remember to do your homework before you buy a company and ensure you understand the business and the industry it’s in. Read the annual reports and pay attention to analyst recommendations – but don’t take them as gospel. You may also want to look at the stock’s chart (perhaps even get into some technical analysis).

Automatic Investor will help you manage your portfolio, but you must choose high quality equities. The old adage, “garbage in, garbage out” definitely applies with investments.

Q: How many funds or stocks do I need to create a diversified portfolio?

A: The answer really depends on your overall personal portfolio. If you have other assets (such as a fully paid house, an art collection, or investment property), you might need as few as four stocks. If all of your assets are in the stock market, you might be better off with as many as fifteen or more. The important point to remember is to spread your risk over all of your assets. Within your equity portfolio, you should diversify by picking stocks from different kinds of companies across several industries. A diversified portfolio might contain stocks from small companies with unique products, some medium-size growth companies, and some large blue chip corporations.

Mutual funds, on the other hand, will automatically diversify your holdings. Even so, however, you should minimize your downside risk by investing in a number of different fund types. An investment in a growth fund, for example, might be balanced with smaller holdings in international and bond funds. Your overall portfolio should depend on your age, investment goals, and risk tolerance.

Q: What are the time-tested investment strategies that work?

A: In a nutshell, a slow, steady, consistent, disciplined strategy does the trick. Start as early as you can and invest a set amount of money every month in stocks or equity mutual funds. In essence, pay yourself first, persevere, and ignore emotion. Automatic Investor is specifically designed to help you implement these proven strategies. That’s why we think Automatic Investor will help you build wealth in an efficient manner.

Most investment problems arise because investors don’t have discipline, they invest inconsistently and they let their emotions make important decisions. That’s why the Buy & Hold strategy is so popular. It removes the buy and sell decisions entirely. However it comes at a price (you don’t profit from the market’s inherent volatility). Automatic Investor can do much better. It has all the advantages of the Buy & Hold strategy, and adds the ability to profit from price fluctuations.

Q: Should I use margin?

A: Automatic Investor is fully capable of handling margin. However use any debt, including margin, sparingly. When you do borrow, invest only in high quality equities and pay the loan off as soon as possible. Margin allows you take advantage of unique opportunities in the market and leverage your profits. But it is a double-edged sword that will just as quickly magnify your losses. Remember, when you use margin, you can incur losses in excess of your portfolio’s actual value.

Warren Buffet (one of the world’s best investors) says, “we will reject interesting opportunities rather than over-leverage our balance sheet.”

He goes onto say, “the financial calculus that [we] employ would never permit our trading a good night’s sleep for a shot at a few extra percentage points of return. I’ve never believed in risking what my family and friends have and need in order to pursue what they don’t have and don’t need.” We think that’s great advice.

Q: Will Automatic Investor manage any investment?

A: Almost. As long as the investment’s price fluctuates and has liquidity (i.e. you can buy and sell whenever you want), Automatic Investor will manage it. The most commonly managed investments are stocks and mutual funds. However you can manage bonds, options, or even a coin collection. Automatic Investor views your portfolio in two parts: the cash part and the fluctuating part. The fluctuating part can be anything that fits the bill. You can even manage different asset types in one portfolio (such as stocks, mutual funds, and bonds).

If you’re starting out, however, we recommend you use Automatic Investor to manage mutual funds and/or stocks.

Q: What makes Automatic Investor better than the other systems out there?

A: Of the hundreds of investing strategies available, study after study has shown the ones that promote discipline, consistency, and remove emotion from the decision making process are superior. In addition, we believe that a strategy has to be easy to use, or you won’t use it consistently. Automatic Investor incorporates all of these traits, and many more. Best of all it’s so simple and easy to use, you’ll find you have more time for the important things in life.

Q: Are there any additional fees?

A: No. There are no subscription fees or stock quote charges of any kind. We recommend you obtain an Internet connection, but one is not necessary. When you purchase Automatic Investor you receive everything you need to get started right away.

Q: Can I obtain help if I’m stuck?

A: Yes. There are many ways to receive help. First you should check the online help manual. If you still have a question, feel free to contact us. We’ll answer your question, usually within 24 hours. We are committed to helping you succeed. As such, you’ll find our customer service truly outstanding. In addition, there are a number of discussion groups available on the Internet. You can post questions, and even learn some things you didn’t think to ask about.

Q: Is Automatic Investor easy to learn and use?

A: Yes. It can be used immediately by the novice and has a very low learning curve. After setting up your portfolio (very easy to do), you simply update share prices whenever you want to and follow the recommendations. That’s it. You’ll also find the user interface intuitive and easy to use – it was designed that way from the outset.

Of course, as you progress in experience, you’ll find Automatic Investor includes a vast array of options you can set according to the characteristics of your portfolio, your investment goals, and your risk tolerance. In addition, you can incorporate many of the proven investment strategies such as diversification and asset allocation.

Automatic Investor is akin to playing the guitar. You can learn to play it quickly, but you can also spend the rest of your life learning advanced techniques to fine tune your performance.

Q: Will I make a million dollars?

A: We hope so, but there is no guarantee. As with any investment strategy, there is risk involved. We believe Automatic Investor minimizes your downside risk compared with other strategies. However, you must do your own due diligence and take responsibility for your investments (please read our disclaimer). No one knows or cares about your personal circumstances like you do; how much money you have to invest, your risk tolerance, your goals, and your most suitable and comfortable time frame. You should do everything in your power to learn about where your money is invested.

That said, there are many people around the world who are already using the strategies and methods contained in Automatic Investor (the basic theory was developed in the 1970s) to successfully build wealth.

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