Systematic trading is simply a method whereby one automatically and systematically sets up an account to add funds to an investment regularly. Consequently, given the same dollar investment, when share prices of stocks or mutual funds or unit values of variable annuities are high a systematic investor buys less of them, and they purchase more when prices are lower.
Systematic investors have no regard to market timing and are adding the same dollar amount on a regular long term basis with the idea of accumulating additional stock or mutual funds shares and or units of variable annuity accounts.
Most of the major mutual fund companies and variable annuity companies offer flexible systematic accumulation plans for their investors. Typically, there is a minimum account opening amount needed, after which additional investments of as little as $25.00 per investment period can be added. The investment period might be weekly, bi-weekly, monthly, or quarterly.
Generally, systematic trading plans are set-up as direct periodic and automatic withdrawals from personal savings and or personal checking accounts. These plans can be stopped or started at anytime; and in addition to the automatic component of the program; investors can add or withdraw funds as they deem appropriate.
A systematic trading plan does not assure a profit and does not protect against loss in a declining market. Investors should consider their financial ability to continue their purchases through periods of all price levels.
Overall, systematic trading programs have been recognized historically as an excellent method for developing what could be a substantial investment account, i.e., wealth accumulation.
Systematic trading accumulation plans are available for individual accounts, joint accounts, Uniform Gifts to Minors accounts, Educational IRAs*, Roth IRA*, IRAs* and various other retirement type accounts, etc.