Top 5 SIP Plans for Investment in UAE

Top 5 SIP Plans for Investment in UAEPolicybazaarAverage Rating / 5 ( reviews)
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What is SIP?

In simple terms, a Systematic Investment Plan, a.k.a. SIP is a mode of investment in mutual funds done on a regular basis in a systematic manner. This mode of investment is somewhat similar to a recurring deposit with a bank, in which you deposit a fixed amount of money in your RD account. However, the only difference is that your funds are installed in a mutual fund scheme instead of a bank deposit. Hence, your investment in SIP is subject to market risk.

SIP encourages regular saving habits in an investor and enforces a disciplined approach for investment in UAE.  This investment instrument works on the simple rule of investing regularly in order to build your wealth in the long run. In SIP a fixed amount is deducted automatically from your account and invested in the scheme for a specified tenure on a daily, monthly or quarterly basis (as per your preference).

Benefits of SIP

The following are the pros of investing in a SIP:

Light on Your Pocket

As an individual investor, SIPs allow you to make contributions towards your investment in UAE at regular intervals. This helps in reducing the burden of making a lump sum contribution at one go and makes your investment lighter on your income.

Manage Market Volatility Well

SIPs help in evening out the volatility of the market. It can be dangerous for both your health and wealth to time the market, which is why all you have to do is focus on the time in the market in your journey to build wealth by choosing the best mutual fund scheme. A SIP in a mutual fund that holds a steady record helps the investor to stay invested for a long term which helps in evening out the volatility of the market.

Take Advantage of The Power of Compounding

SIPs encourage the habit of regular investing, this enables you to compound your funds that are invested. In the long run, SIPs can compound your funds better and in a systematic manner contrary to investing one lump sum, especially considering the volatility of the market.

Useful Method for Planning Financial Objectives

Every investor has certain financial goals they wish to achieve it could be saving for a vacation, buying a house, saving for a child’s further education, etc. These goals can be achieved with proper and systematic financial planning. Many investors invest in the equity market as an option to meet their short term goals instead of seeking long term wealth creation for meeting their objectives. These goals can be achieved by investing in SIP, and the earlier you start to invest, the better.

Top 5 SIP Plans for Investment in UAE

Here are the top five plans for investment in UAE in SIPs:

SIP Provider SIP Plan

Standard Chartered

Smart Savings Plan

Emirates NBD

Monthly Investment Plan

Citibank

Systematic Investment Plan

ADCB

Systematic Investment Plan

HSBC

Systematic Investment Plan


How to Select the Best Mutual Funds for SIP?

Not all mutual funds are the same. There is a ‘one size fits all’ approach for these funds. While one fund could be the right for an investor, the same could be unsuitable for another. There are various things that an investor needs to study before deciding on the mutual fund scheme to choose. Some of these things are:

Performance of the Fund

The past performance of a fund is an important factor in analyzing that fund. However, it is not everything, as it may or may not sustain in the future and therefore should not be the sole basis for comparison between different investment options. It just indicates a fund's ability to clock returns across the conditions of the market. The likelihood of a fund with a good track record performing well in the future is higher than one that has not performed well. You must note the following while considering the performance of a fund:

  1. Comparison: Solely looking at a fund’s performance does not indicate anything. Which is why it is important to compare the fund with its peers and against the benchmark index. You should be careful of the funds you select for comparison, they should be of a similar category.
  2. Time Horizon: If you wish to invest in equity funds, it is important for you to have a longer time horizon, you should then evaluate the long term performance of a fund. However, short term performance should not be disregarded.
  3. Returns: The returns of a fund are extremely important while evaluating the performance. However, it should not be the only parameter for evaluation. You should just not invest in a fund because of high returns, other factors such as risk also need to be considered.
  4. Risk: It is important to evaluate the performance of a fund against the risk because it helps to evaluate if the fund’s risk parameter is in-line with your risk appetite. The risk is generally measured by the Standard Deviation.
  5. Risked Adjusted Return: This signifies how much the fund has delivered against the risk taken. It is important to know this because investors should opt for a fund that delivers a high risk-adjusted return. This is generally measured by the Sharpe Ratio. The higher the Sharpe ratio, the better is the performance of the fund.
  6. Portfolio Concentration: Funds with a higher concentration on certain sectors or stocks tend to be highly volatile and risky. Hence, only the investors with a high-risk tolerance should consider investing in them.
  7. Portfolio Turnover: This refers to the frequency with which the stocks are traded in a particular fund’s portfolio. The higher the turnover, the higher will be the volatility.

Fund Management

The performance of a fund is also dependent on the manager(s) of the fund. Therefore, it is vital for the manager to have sufficient experience in dealing with the movements of the market.

Costs

If you are looking at two funds that are similar to each other in most ways but the cost of one exceeds the other, only for marginally better performance.

In a Nutshell

The investor can develop healthy financial habits by SIP investment in UAE as they encourage regular contributions without putting a heavy burden on the income of the investor.

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