Traditional methods of manually setting aside funds or making periodic investments can be challenging for new-generation investors and time-starved working professionals.
Automation provides a solution by streamlining the process, making it easier for tech-savvy investors to save money, trading in stocks, and invest in mutual funds regularly without manual interference.
You can automate –
- Savings – using apps, ECS, and bank saving solutions
- Investments in Mutual funds – using the SIP facility
- Stock Trading – using Algo trading APIs
Few brokers also offer SIP facility to invest in selected shares. But it is still a new service and yet to go mainstream.
Pro Tip – As per the InvestingExpert Stockbroker Report 2023, Edelweiss (Nuvama) charges the lowest brokerage charge of Rs 10 on all segments. You can save a lot on brokerage charges if you do large-volume Algo trading using Nuvama as a broker.
The article gives you a sneak peek of what automation is when it comes to savings and investing. But before let’s talk of the benefits of automating savings and investing.
Benefits of automating investment and savings:
Automating investment and savings removes the emotional aspect of financial decision-making.
Emotions like fear and greed often lead to impulsive actions that can harm long-term financial goals.
By automating the process, you stick to a predetermined plan without being influenced by short-term market fluctuations or emotional impulses.
Elimination of Human Error
Humans are prone to errors, and manual handling of finances increases the risk of mistakes.
Automating savings and investments reduces the likelihood of errors such as missed transfers, incorrect investment amounts, or delayed contributions.
By relying on automated systems, you can minimize the chances of costly errors and ensure accuracy in your financial transactions.
Access to Professional Expertise
Many automated investment platforms provide access to professional investment expertise and advice. These platforms often employ financial experts who create portfolios or recommend suitable investment options based on individual risk profiles and goals.
By automating investments through such platforms, one can benefit from the knowledge and expertise of seasoned professionals.
Increased Transparency and Control
Automating savings and investments offers increased transparency and control over financial matters. You can easily track your progress, monitor investment performance, and make adjustments as needed.
Automated platforms also provide detailed reports, real-time updates, and consolidated views of financial portfolios, empowering you with better insights into financial health.
Flexibility and Customization
Automated systems are designed to be flexible and customizable. Where you can adjust your automated contributions, increase or decrease investment amounts, or redirect funds based on changing circumstances or financial goals.
This flexibility allows for adaptability as one progress through different life stages or experience shifts in their financial situation.
Cost averaging and Compounding
Regular investing through automated systems enables the benefits of rupee cost averaging and compounding.
By investing fixed amounts at regular intervals, you benefit from buying more units when prices are low and fewer units when prices are high, thereby reducing the impact of market volatility over time.
How you can set up automated savings and investments in India
Here is a step-by-step process to set up automated savings and investments in India for any investor
Step 1: Determine How Much You Can Save and Invest
The amount of money that you need to save and invest depends on your financial goals, income, and expenses.
A good rule of thumb is to aim for a savings rate of at least 20% of your income.
Step 2: Define Financial Goals and Risk Profile
Start by identifying your financial goals, whether it’s purchasing a house, saving for retirement, or funding foreign education.
Determine your risk tolerance, considering factors such as age, income, and time horizon. This will help you select appropriate investment options.
Step 3: Research and Select Investment Options
Conduct thorough research on different investment options available such as mutual funds, stocks, bonds, or exchange-traded funds (ETFs).
Consider factors like historical performance, fees, and risk factors. Seek professional advice if needed.
Step 4: Choose Your Savings & Investment Platform
Select a reliable investment platform and bank that offers automation features.
Some popular platforms in India include –
- ICICI Bank, HDFC Bank, and Kotak Bank – for automated online RD & FD
- Mutual fund platforms like Groww, and ETMONEY – for automated SIPs
- Zerodha, Upstox, and 5Paisa APIs – for automated trading
Evaluate their user interface, ease of use, investment options, and associated costs.
Step 5: Complete KYC Process
Complete the Know Your Customer (KYC) process mandated by regulatory bodies. This typically involves submitting identity proof, address proof, and other relevant documents. KYC can be completed online or through physical submission, depending on the platform you choose.
Step 6: Link Bank Account
Link your bank account to the chosen investment platform. This allows for seamless fund transfers and automated transactions. Ensure that the platform supports integration with your bank.
Step 7: Configure Automatic Transfers
For automated savings, you need to authorize your bank for direct debits through the ECS mandate.
Set up Systematic Investment Plans (SIPs) if you are automating investment in mutual funds. Determine the investment amount and frequency (monthly, quarterly, etc.). The chosen platform will facilitate automatic deductions from your linked bank account and invest the funds in the selected mutual funds on specified dates.
For automating algo trading you need to select a set of predefined rules and criteria for entering and exiting trades, with the aim of generating profits. The criteria will be based on market conditions, price movements, and other relevant factors.
For other investment options, such as direct stock purchases set up automatic transfers from your bank account to the respective investment accounts.
Most banks provide options for standing instructions or direct debit, allowing for automated transfers on specified dates.
Step 8: Monitor and Review
Regularly monitor your automated investments to assess performance, review portfolio allocations, and make any necessary adjustments. Keep track of your progress toward financial goals and periodically reassess your risk profile and investment strategy.
Remember, while automation simplifies the investment process, it’s crucial to stay engaged and review your investments periodically to ensure they align with your evolving financial circumstances and goals.
Disclaimer: The steps provided are for informational purposes only. It’s recommended to consult with a qualified financial advisor or conduct further research to make informed investment decisions.
Tools that can help you automate savings and investments
There are several tools available in India that can help you automate your savings and investments.
Here are some popular tools and platforms:
Many banks in India provide online banking platforms that offer features for automated savings and investments. x
For example, ICICI Bank offers iWish, iWish is a flexible recurring deposit feature offered by ICICI Bank, that allows you to automate your savings for specific goals.
HDFC Bank SIP: HDFC Bank offers an automated SIP facility through which you can set up systematic investment plans in mutual funds directly through their net banking platform.
a) Groww: Groww is a user-friendly investment app that offers automated investing in mutual funds. It provides a seamless experience for setting up SIPs and allows you to track and manage your investments.
b) ETMONEY: ETMONEY is a comprehensive financial services app that offers features like automated investing in mutual funds, goal-based planning, and expense tracking. It provides personalized recommendations based on your financial goals.
c) Paytm Money: Paytm Money is a popular app that allows you to invest in direct mutual funds. It offers features like automated SIPs, portfolio tracking, and easy investment management through its user-friendly app.
Online Mutual Fund Investment Platforms
a) Kuvera: Kuvera is a robo-advisory platform that helps automate investments in mutual funds. It offers features like goal-based investing, portfolio tracking, and tax optimization strategies.
b) Scripbox: Scripbox is an online platform that simplifies investing in mutual funds. It provides automated investment options, personalized portfolios, and recommendations based on your financial goals.
Algo Trading Platforms
Zerodha offers algo trading through its platform called “Streak.” Streak provides users with a drag-and-drop interface to create and backtest trading strategies. It supports algorithmic trading across equities, futures and options (F&O), and commodities.
Upstox offers algo trading through its platform called “Upstox API.” It provides APIs that allow traders to connect their own algorithms and execute trades programmatically. Upstox API supports trading in equities, F&O, and commodities.
5Paisa provides algo trading capabilities through its platform called “API Bridge.” The API Bridge allows traders to connect their algorithms and execute trades across equities, F&O, and commodities.
These are just a few examples of the tools and platforms available in India.
NOTE – It’s important to research and compare different options to find the one that best suits your investment preferences, goals, and risk tolerance.
Automating investment and savings provides numerous benefits, including emotional discipline, reduced procrastination, elimination of human error, access to professional expertise, increased transparency and control, flexibility, and time diversification.
By leveraging automation, you can enhance their financial well-being, build wealth over time, and achieve their long-term financial goals more effectively.