Automatic Investment Program

any program in which an investor can accumulate or withdraw funds automatically. Some of the most popular automatic investment programs include:
• mutual fund debit programs, in which a mutual fund will automatically debit a preset amount from a bank savings or checking account to buy fund shares on a weekly, monthly, quarterly, or annual basis.

• mutual fund reinvestment programs, in which all dividends and capital gains are automatically reinvested in more shares of the fund.

• stock dividend reinvestment plans, in which companies offer their shareholders the opportunity to reinvest their dividends in more shares of the company, and in some cases, buy additional shares at a discount with little or no brokerage commissions.

• defined contribution plans, offered by employers to their employees, which allow automatic investment in several funds through payroll deduction. Corporate plans are called 401(k), nonprofit and educational plans are called 403(b), and federal and municipal government plans are called 457s. To entice employees to participate in these plans, many employers match employee contributions.

• savings bond payroll savings plans, which allow employees to purchase savings bonds through payroll deduction.
In addition to allowing automatic purchases of shares, automatic investment programs also permit participants to withdraw a set amount of money on a regular basis. These are known as automatic withdrawal plans. For example, a retiree may request that a mutual fund automatically sell a fixed dollar amount of shares every month and send him or her a check.

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