Investing apps make auto-investing simple and cost-effective

A regular habit of saving and investing is critical for financial independence; however, the practise of regularly setting money aside in a savings account or investment account can be hard. Enter the concept of automatic investing, or auto-investing.

The concept isn't new with many cryptocurrency traders quite familiar with the advantages of auto-investing and many tech-savvy traders using scheduled transfers and execution orders to set up automatic trading strategies.

However, for many investors who don't want to take a hands-on approach to investing and don't want to constantly monitor their portfolios, while scanning news and business reports, relying on auto investing makes participating in the markets much easier and less time-consuming. Unfortunately, investing tools and apps that offer auto-investing to trade traditional assets, such as stocks, exchange-traded funds (ETFs) and other securities, are still relatively new in Canada.

The good news from Money.ca is that more financial institutions and fintechs are starting to offer auto-investing options. But before you can use auto-investing tools, it's best to get a better understanding on what the term auto invest means, when and how to use auto-investing, and what tools are available to help make the most of your investing journey.

What does automated investing mean?

While auto investing is a relatively new concept in Canada, the idea borrows from a more established concept of auto-savings programs which are offered by many major banks and quite a few fintechs. These automatic savings programs, a boon for financial planning, allow customers to set up predetermined transfer amounts from their chequing accounts to their savings accounts at regular intervals, such as every payday. One of the better known auto-saving programs is RBC's NOMI program, which offers RBC customers the opportunity to find and save cash not allocated to pay bills.

However, RBC's NOMI isn't the only auto-saving option in Canada. This year, Mogo launched Moka.ai. While Moka's parent company, Mogo, has been around for years, the Moka brand and concept — to provide actively managed portfolios and auto-investing options at an affordable monthly rate — is relatively new in the Canadian marketplace. But the foundation of Moka's monthly plan is to help savers and investors to find and allocate unspent funds to savings and investing goals.

Whether using RBC's NOMI or Mogo's Moka, both options help monitor your spending and automatically transfer small amounts of money into your savings account. While the NOMI plan looks for money you are likely not to spend, the Moka account automatically rounds up your purchases and bill payments and uses the extra dollars and cents to quickly build a savings nest egg that can be used as an emergency fund or redeployed to grow your investment portfolio.

Of course, investors more comfortable with technology may already use an automatic investing strategy using either their online brokerage account or through robo-advisor platforms. Another option is to use more traditional investment tools, such as stop-loss orders. By setting up stop-loss or limit orders in direct brokerage accounts, an investor can automatically buy or sell a security helping to maximize investments or minimize potential losses.

How auto-investing works

Here's an example of how auto investing works. Let's say you use an intelligent robotic platform (commonly known as a robo-advisor) for auto investment. You would set up an automatic transfer of a set amount, like $500 each payday (or even just once a month), to be moved into your investment portfolio. Then, when the money is transferred into your portfolio, it is automatically invested based on your pre-set portfolio plan. For example, if you pre-selected a portfolio that prioritized growth, those transferred funds would automatically be invested into growth ETFs.

Of course, many investors will set up the money transfer — transferring funds from the paycheque to their investment account automatically. But these transferred funds just sit in your investment account — essentially, the $500 would sit there until you invested it in whatever stocks or ETFs you want to buy. With auto invest, the transfer of funds is automatic and the purchase of stock or ETFs is automatic.

Is auto-investing a good idea?

Making regular deposits into your investment account is the key to creating a fiscally strong investment portfolio that can support you into retirement. The trouble is that many of us need more discipline or the time to transfer a set amount into our portfolio regularly. This method streamlines the investment process and ensures you're putting aside money and investing in your future without any effort or attention.

The appeal of auto-investing is undeniable; by following the principle of dollar-cost averaging, auto-investing gives investors an edge when it comes to disciplined saving and investing.

• What is dollar cost averaging? Dollar cost averaging is the practise of investing a fixed dollar amount on a regular basis, regardless of how much the share price moves up or down. The practise of dollar cost averaging helps to establish a disciplined investing habit. Plus, it helps establish more efficient — and less emotionally driven — investment decisions and be more efficient in how you invest and potentially lower your stress level—as well as your costs.

Auto-investing apps and tools available to Canadians

Moka is an innovative app that helps you save money. It rounds up purchases to the nearest dollar and invests the remaining funds into a low-cost ETF investment account, making investing automatic and easy. Moka stands out because few investment platforms offer this "rounding up" service. You usually have to decide how much money you want to invest and select a set amount. Moka is unique because it "finds" money for you by rounding up your purchases but also allows you to make weekly fixed contributions for a flat fee each month. There are two plans — $7 per month or $10 per month — and both give investors access to self-directed trades, automatic investing as well as five professionally managed portfolios. Learn more about Moka.

With Questrade auto invest, you can set up automatic deposits and invest your money in a diversified portfolio of ETFs based on your risk tolerance and financial goals. Learn more about Questrade Auto Invest.

Wealthsimple Invest is a robo-advisor that automatically invests your money in ETFs based on your risk profile. It also offers an auto-invest feature to streamline investing. Compared to Moka and Questrade, Wealthsimple is known for its user-friendly interface and comprehensive investment options, plus the free ETF and stock purchase option (no trading fees) make it a great option for buy-and-hold investors. Learn more about Wealthsimple Invest.

Bottom line

Auto-investing can be ideal for those who prefer a hands-off approach to wealth-building to grow their investments. It's an easy way to ensure your savings increase with little effort.

— with files from Romana King