Everything you need to know about SIP in the UAE

The popularity of SIP investments has increased significantly in the past few years in the UAE. SIP or systematic investment plan is a unique approach to invest systematically into mutual funds in the UAE. Very often investors are confused and consider SIP as an investment product which is not correct. SIP is an approach that allows potential investors to invest in mutual funds programs periodically.

Financial experts and fund managers advise not to invest a lump-sum in equity or debt funds as the investment is subject to a substantial level of market risk that might lead to loss of capital. The correct and more suitable approach to investing in mutual funds in UAE is via the SIP approach. Fund managers recommend staggering small investments regularly over a period of time which comparatively is a better way to invest in mutual fund programs.

The article will shed light on the SIP approach for mutual fund investments in the UAE and will help you to extract maximum benefit out of your investment plan.

What is SIP?

SIP or systematic investment plan is a tool that allows investors to invest small amounts into mutual fund investments to reap profits. SIP programs are valid for fixed periods during which a pre-decided amount is debited from the applicant’s account monthly, quarterly, half-yearly or annually as per the convenience of the applicant. Mutual funds are interconnected to SIP as the capital accumulated by investors is invested in market-based securities to create and accumulate wealth.

SIP programs help investors to average the purchase cost and maximize returns on mutual fund investments in the UAE. Periodic investments via SIP safeguards investments and capital against market swings. During the phases of market instability SIP programs prove to be extremely helpful as they prevent financial losses and loss of capital.

Benefits of SIP

SIP programs are user-friendly and come with the following benefits-

Disciplined Saving

The first and foremost benefit of investing in SIP programs is that these plans help investors to inculcate healthy financial habits and build a corpus for themselves and their loved ones. SIP programs require long-term consistency and patience, each installment for your SIP program should be looked upon as another step that is taking you closer to your financial goals.

Flexibility

Majority of other investment programs available in the market come with a minimum lock-in period. With SIP programs there is no such compulsion and investors can withdraw from the plan at any given time without bearing any sort of financial losses. Investors can increase or decrease the amount of their periodic investment as per their convenience and requirement. Thus, it is quite evident that SIP programs are highly flexible investment tools.

Long-term Gains

From the perspective of returns or gains, SIP programs hold immense potential to deliver significant rates of return. When SIP programs are used to park capital for relatively longer durations the returns received are lucrative.

Convenience

If you are a rookie in the world of financial investments SIP is quite a suitable choice of investment. Investors can start investing in mutual funds via the SIP approach easily online or offline as per their convenience.

Emergency Fund

SIP investment programs can be used as an emergency fund during phases of financial instability. Mutual fund investments carried out via the SIP approach are easy to liquidate which means during emergency investors can withdraw the amount without any paying any penalty.

How to invest in mutual funds via SIP approach

Investors can begin their SIP program by comparing and choosing the best plan online. Initiation requests can be placed online to begin the investment program. In order to enroll in a SIP program, the following documents are required.

1. Identification proof
2. Address proof/ Passport for expats
3. Photographs
4. Bank account details

Once your initiation request is accepted a representative from the bank or financial institution will visit you to collect and verify your documents. After getting the documents verified from the representative applicants to need to fill in a form selecting the frequency, time duration and amount that is to be debited periodically.

After filling the application form and submitting the required documents the bank/financial institution verifies the information and starts the SIP program. Investors are notified via text messages and emails.

Conclusion

Investors should focus on their long term financial goals while choosing the SIP in the UAE. Furthermore, investors should lay emphasis on the time horizon of the investment along with the risk tolerance capacity of the investor.

Mutual fund investments carried out through SIP in UAE are safe and secure investment tools that allow all classes of investors to park their savings with the motive of growing and accumulating wealth.