All You Need To Know About SIP

All You Need To Know About SIPPolicybazaarAverage Rating / 5 ( reviews)
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Investment in Dubai constitutes an integral part of your financial portfolio. Investing your hard-earned money provides opportunities to grow the principal amount that safeguards you and your loved ones against financial hardships. The key to creating wealth depends entirely on inculcating healthy financial habits. Investing via investment plans is as much about psychology as it is about the arithmetic of investing your precious earnings. The market is filled with several investment tools that help you to grow your savings gradually over time; and provide financial security.  

SIP or systematic investment plan is a method of investing your earnings in mutual funds. It allows the investor to invest periodically, which helps in cultivating a healthy habit of saving and eventually accomplishing the goal of wealth generation and accumulation.

How do SIPs work? How much do I invest? How do I invest? And many such questions would have crossed your mind the moment you would have thought about SIPs. To help you gain a clear understanding of SIPs in today’s thread we’ll be discussing everything you need to know about SIPs.

What is SIP?

SIP stands for (Systematic Investment plans) which are an ideal financial tool that provides opportunities for investors to invest their earnings in fixed regular intervals of time. It is a well-planned method of investing which helps to multiply your savings by periodic investment in Dubai that provide returns. SIPs work by investing small amounts of money periodically as per the convenience of the investor (weekly, monthly, quarterly, half-yearly, annually) into a selected mutual fund of choice.

SIP has several advantages over other investment plans the primary one being that it allows the investor to constantly monitor the performance of your fund. It is recommended that one should prefer investing in two or three mutual funds instead of investing in multiple funds.

How do SIPs work?

SIPs work in an organized way by automatically investing a portion of your earnings every month which yields periodic returns. SIPs efficiently manage your investments by providing consistency and discipline in the overall process. These plans are extremely suitable for individuals who are new to the world of mutual funds and investments. SIP takes care of all your investment needs by guiding you through the entire process of systematic investment and making sure that you receive proper returns.

To understand the working of SIP more clearly let’s consider an exemplary scenario-

Suppose Radheyshyam makes AED 60,000 every month and he decides to set aside 10% of his total monthly earnings to invest in SIP. Radhey starts investing 10% of his earnings from Dec 2019, so as a result of every month an amount of AED 6000 will be auto-debited from his bank account and will be invested in mutual funds in UAE of his choice. SIPs provide discipline and consistency in investment as mentioned earlier. Auto deduction every month ensures both consistency and discipline in investment as the mutual fund company invests the money on Radhey’s behalf. Now, since Radhey has been investing AED 6000 every month, in the coming years the principal amount eventually grows and turns out to be a huge amount.

After 5 years Radhey would have invested AED 6000 sixty times which makes it AED 360000 that he would have invested into mutual funds in UAE. The power of compound interest enhances the reliability of systematic investment plans and the annualized compounded returns are quite profitable.

Unlike the Dubai stock exchange which is highly dynamic and is often subjected to rise and fall in figures, good mutual funds consistently outperform the market.

How Much Do I Invest in SIPs

Ideally, you should invest approximately 50% of your money into equity which will ensure vigorous returns over a while. Before investing in any sort of investment in Dubai it is very important to be aware of the fact that capital investments involve some degree of risk which affects your returns. Long term equity-based investments in Dubai are recommended mainly because market instability gets corrected with time. Leaving the SIP in middle will make you miss out on several opportunities that would have fetched you a higher return.

As the market is dynamic in stability it is very obvious that your fund might provide profit or loss at different points of time. The key to creating wealth is to stick to the plan for long durations which increases the possibility of growing your money exponentially.

Benefits of SIPs

The most significant benefit of Systematic investment plans is their simplicity. SIPs are a recurring investment in Dubai that investors commit for the long term. By ensuring pre-commitment SIPs turn out to be highly disciplined and consistent forms of investment. Since SIPs are a recurring form of investment in Dubai, the amount invested regularly is small and does not add burden to the investor’s pocket. The addition of small allocations periodically adds up to a significant corpus over time, moreover, SIPs frees the investor in Dubai from getting worried about the market risks and its impact on their investments.

SIPs do not include any entry or exit charge for the plan this means that if the plans do not work satisfactorily, you can withdraw every bit of the money that you’ve invested in the plan. These plans are quite flexible and affordable option and you can start with small amounts of money and increase your investments gradually as your earnings increase over time. SIPs save your time and work on autopilot mode which provides the investor in Dubai ample time to look after their business or jobs while the money takes its care.

Summing it up

SIPs are an excellent investment option as it provides consistency in investment. To perform better and reach your financial goals at a faster pace you should start early which will help you to earn bigger returns. Moreover the longer you remain in the process of systematic investment better will be the returns due to the effect of compounding.

While investing in SIP you should always be patient as your money will grow in the long run. SIPs are more consistency driven tools so the longer and consistently you keep on investing the better will be your returns.

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