SIP Investment in UAE

SIPs or Systematic Investment Plans are one of the most popular investment plans in UAE. SIPs allow the investors to invest small amounts periodically instead of giving a lump sum amount in go. This allows the investors to build their investment portfolio affordably and accumulate a good corpus with a long-term perspective. Maintaining all the important benefits that mutual funds offer as an investment vehicle, SIPs also introduce flexibility and ease of investment. Let’s understand everything you need to know about SIPs in the UAE.

What is a SIP?

SIP stands for Systematic Investment Plan. As mentioned earlier, it is a way of investing in mutual funds. Rather than investing a lump sum amount at once in the beginning, you can choose to invest small amounts at regular intervals. This process of investing is called a SIP.

Under a SIP, you invest a specified amount after pre-specified intervals. You can either choose the maximum period up to which you would invest or you can continue investing for as long as you want.

For instance, say you choose to invest AED 1000 every month in a SIP for 36 months. In this case, you will be required to invest a thousand dirhams every month for the next 36 months and build a corpus. The money you invest over time keeps accumulating interest as per the ROI of the mutual fund you have chosen.  

Important Aspects of SIP investments

Some of the most important aspects of SIP investments in UAE are as follows:

• You can increase the SIP investment amount if you want. If you do so, you would have to contribute the increased amount regularly.
• You can stop the SIP investment plan whenever you want or even pause it.
• SIP investment facility is available with all types of mutual funds.
• Your investment is automated when you choose to invest through SIPs.

Benefits of SIPs

SIP investment in UAE is popular among investors because they introduce the flexibility of investment and increased autonomy to all the basic benefits that mutual funds offer as an investment vehicle. Some of the primary benefits of choosing to invest through SIP investment plans include the following:

Ease of Investing

Investing in mutual funds through SIP investment plans is quite simple. You can invest online through the mutual fund company’s website or offline through the company’s branch office. After investing, place an auto-debit mandate on your bank account and the SIP would be debited as and when it is due. You can forget the hassles of remembering your SIP dates. Moreover, your corpus would keep on accumulating with each successive SIP instalment.

Affordable 

Investing through SIP investment plans makes it possible for small investors to invest in mutual funds. Since lump-sum investment might not be affordable for all, SIP allows you to invest in affordable amounts, regularly, so that you can build up a corpus without pinching your pockets or disturbing your budget.

Disciplined Investments

SIPs are a way of saving in a disciplined manner as it involves regular investments. By setting up a SIP you can ma that can help you make yourself habitual of putting aside an small amount as savings and achieve your financial goals easily.

Lesser Effects of Market Volatility

Market volatility does not tend to affect your SIP investment plan. When the market is high, the SIP gets you a lesser number of units. On the other hand, when the market is low, you can get a larger number of units at reduced prices. On the whole, the effective cost of investment gets averaged out and you get the benefit of yielding at least a decent return as the end result of your investment. You don’t have to time the market and you get the benefit of all-weather investing.

The Miracle of Compounding Returns

Compounding returns means earning additional returns on past returns. For instance, say you invest AED 100 on which you earn a return of 10%, i.e., AED 10 in the first year. In the second year, if the rate of interest is 10%, this interest would be calculated on AED 110, i.e., the investment plus the return earned last year. Compounding returns helps in increasing your corpus. If you give your investments time, they would increase considerably helping you achieve your financial goals. Investments are regularised with SIP investment plans which means that you can use compounding to your advantage. With a long-term horizon, you can accumulate attractive returns on your investments and create a sizeable corpus.

Ease of Financial Planning

You can opt for multiple SIPs and earmark each SIP to a financial goal that you have. For instance, you can start an SIP each for creating a fund for your first home, to buy a car, to send your child to an international educational institute, etc. With different SIP investments allocated to different goals, you can have a diversified portfolio and also plan your finances effectively.

How to Choose SIPs for Investment?

If you are interested in investing in a SIP, there are certain parameters that you should keep in mind when choosing the best SIP to invest in. These parameters are as follows:

Choose a Fund That Matches Your Risk Profile

There are different types of mutual fund schemes. Equity schemes have the potential for high returns but at high risks. On the other hand, debt funds offer stability in terms of risk but have limited returns. Balanced funds combine the benefit of equity and debt.

Before you choose a SIP investment in UAE, choose a fund that matches your risk profile, investment needs and investment horizon. Then choose to invest in the fund through SIPs.

Assess the SIP Amount

The amount that you set aside for your SIP should be enough to create the corpus needed for to achieve your financial goals. Moreover, the amount should be affordable so that you can set it aside regularly without straining your budget. Check the minimum SIP amount of the fund that you have to select as per the requirements of the mutual fund. Then, assess the savings needed to meet your goals. Then determine the SIP amount that you can invest regularly. 

Compare The Performance of The SIP

Compare the available mutual funds and the type of scheme that you want to take on as your investment option. For instance, if you are investing in equity, compare the performance of different equity funds available in the market. Choose a fund that has consistently given high returns to its investors while projecting moderate risks. Though past returns do not guarantee future performance, they, at least, tell you how a certain investment vehicle performs. If the returns have been high and consistent, it means that the portfolio is being handled well and you can invest in such a fund.

Check the Cost 

Always check the price of the investment option that you choose to invest in. this should include all the additional fees and charges that come with the basic investment requirements. Check the expense load properly. Moreover, check the expense ratio of the fund. Choose a fund that has a lower expense ratio so that a larger part of your investment is directed to the market. 

Check the Portfolio Composition 

Lastly, check the portfolio composition of the mutual fund scheme that you want to invest in. The portfolio should contain the top-rated securities so that the return potential is enhanced while the risks are reduced. 

The Bottom Line

SIPs can be a good addition to your portfolio as they allow you to enter and stay in the investment market at affordable rates. You can also use SIP calculators to find out the SIP amount that you should invest to create the desired corpus or vice-versa. Compare and find the  SIP calculator is an online tool that helps you estimate your savings for a given SIP amount, tenure and ROI. SIP to invest in the UAE and start building your corpus.