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DUBAI, UAE – (ARAB NEWSWIRE) – Financial freedom is the one thing everyone strives to attain to get the things they have dreamt of owning their entire life. However, individuals can achieve financial freedom or flexibility only with strong financial planning and investing in the right way. Lately, Systematic Investment Plans (SIPs) have evolved as an excellent investment option for both amateur and seasoned investors. A Systematic Investment Plan (SIP) is a form of investment vehicle offered by mutual funds in which a person can invest a small, fixed amount of money regularly rather than making a large lump-sum investment.
People invest a fixed sum of money in a Systematic Investment Plan (SIP) investment periodically to purchase a particular number of fund units. When this process continues for a long time, investors can invest in the mutual fund systematically, irrespective of the market condition. In short, while investing in SIPs one will not need to time the market for their investment. Timing the market can be risky as an investor can invest at the wrong time and incur a loss, a sheer factor of unpredictability that Systematic Investment Plan (SIP) investments try to eliminate.
What is SIP?
Systematic Investment Plans (SIPs) involve regular monthly investments in a mutual fund, ensuring that the investor develops the habit of building financial discipline. Additionally, Systematic Investment Plans (SIPs), being market-linked investments, have the potential to beat inflation and can help investors to grow their money over time.
Benefits of SIP Investments
The following are some benefits of investing in Systematic Investment Plans (SIPs):
- Automatic Investment
When an investor opts for a Systematic Investment Plan (SIP), a prespecified amount is transferred or deducted from their bank account on a fixed date every month. The deducted amount is used to buy units of the mutual fund at the current market rate.
- Lower Overall Cost of Investment
When investors start investing the same amount in a mutual fund at fixed intervals spread over the long term, they can buy more units when the price is lower and vice versa; i.e., buy less when the price is higher. This reduces the overall cost of investment over time.
- Reduced Investment Risk
A primary reason why Systematic Investment Plans (SIPs) have a reduced investment risk is that the potential returns are calculated based on the average Net Asset Value (NAV) during the investment period. Based on the current and subsequent month’s NAVs, investors will be able to get certain units for the amount invested each month. Investing in an SIP allows investors to get more units when the markets are priced low and fewer units when the markets are priced high.
- Liquidity at Anytime
Most Systematic Investment Plans (SIPs) let investors withdraw their funds as they see fit, which make them highly liquid at anytime. However, investors may sometimes have to pay exit load fees. Exit load fee is charged when investors fully or partially exit a scheme within a certain period from the date of investment, as mentioned in the Scheme Information Document.
- Potential for Long-term Gains
People who invest regularly through SIP for a long period of time will reap the benefits magnified by the power of compound interest. This ensures that investors earn returns not only on their principal amount invested but also on the gains earned from the principal amount.
- Build Financial Discipline
Conclusion
Systematic Investment Plans (SIPs) are one of the easiest ways for investors to begin their investment journey. SIPs are not only convenient, affordable, and flexible, but they also have the potential to generate in the long-term wealth. Individuals can invest in a Systematic Investment Plan (SIP) at any time with minimal risk. There is no ideal time for an investor to start investing in SIPs. The earlier they start, the better their potential returns can be.
SIPs are available to anyone who is interested in investing. An interested person needs to set up a SIP investment in UAE through a bank or financial institution and enjoy the fulfillment of their financial dreams.
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