The dollar amounts are generally small. But, like water dripping onto a rock, the results, over time, can be huge.
Automatic investment programs work wonders over long periods of time because they take the investor's emotions out of the mix. In effect, the programs force investors to buy more of an investment when its price is down -- the hardest time, emotionally, for most people to invest. And the programs force them to buy less when the price is up -- when the temptation to buy too much at too high a price is at its peak.
In addition, automatic investment programs take advantage of the out-of-sight, out-of-mind principal -- if money is never in an investor's hands, then it can't be spent before it is invested.
Many mutual funds and stock purchase programs also allow investors to automatically reinvest their dividends and capital gains in new shares -- a move that can dramatically boost returns over time.
