This is also crucial to identifying an investment system as an SIP.
It’s about creating a habit, through regular recurring amounts, sort of like auto-deposits. Yusuf are also investing a definite amount – AED 1,000 and 2,000, respectively. Notice also that apart from investing at a regular interval – every end of the month or 15th day of the month – Mr. James also invests AED 5,000 in January and then AED 10,000 in December what she is doing does not also qualify as SIP. James invests AED 1,000 in one month and then invests AED 3,000 some three months and 15 days after and then another AED 2,000 a month after, what he is doing does not qualify as an SIP. To emphasise the importance of these two elements, let’s contrast the examples above with others. While their investment plans are different, they have the two common characteristics that make them both an SIP – consistency and regularity. Yusuf, using an SIP, can invest AED 2,000 on the 15th day of every month. Ahmed, using an SIP, can invest AED 1,000 at the end of every month while Mrs. Consistency and regularityįirst, an SIP involves consistency and regularity. Let’s unpack this definition by considering some of its elements. What is an SIP investment plan?Ī Strategic Investment Plan (SIP) is a financial planning tool whereby investors can build long-term wealth by consistently and regularly investing a definite amount of money in an investment portfolio. In this article, we will consider what a SIP is and how it can help you build wealth and achieve your financial goals over time. Today, one of the most tried and tested ways to invest successfully is with an SIP, which in many ways practically applies the long-term investing principles set out in the Nobel-prize winning Modern Portfolio Theory, as well as the benefits that come with consistent lump-sum investing. If you don’t make a plan that sets out how and when you’re going to invest, you’ll struggle to hit your financial goals. As aviation pioneer Antoine de Saint-Exupéry famously said: “A goal without a plan is just a wish.” That’s true of exercise, starting a diet, and even the way that you save and invest money. Simply put, the SIP is a strategic and systematic plan that helps investors achieve their financial goals slowly and steadily.Īs we all know, forming good habits requires some work. But what is an SIP and how exactly can it help investors build wealth? To build wealth consistently over the long term, investors need a strong strategy, and one of best such strategies is the Systematic Investment Plan (SIP).
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