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What Is An Automatic Investment Plan

Views 10942022.05.17

Key takeaways

  • An automatic investment plan (AIP) is to invest a fixed amount of money in a fund at regular intervals.

  • AIP has four features: costs split and fluctuations irons out, disciplined investment to avoid pursuing rises and killing falls, long-term investment with compound interest, Automatic implementation, and time-saving.

Understanding an Automatic Investment Plan

An automatic investment plan (AIP) is to invest a fixed amount of money in a fund at regular intervals. For example, you buy a specific fund of $200 on the 5th of each month. Its features are as below:

1. Split costs and irons out fluctuations

Unlike one-time investments, an AIP is a process of multiple investments with average costs. Due to that the amount of monthly investment is fixed, you will buy fewer units when the price of a fund is high and more units when the price is low, which achieves the desired effect of averaging costs.

2. Disciplined investment to avoid pursuing rises and killing falls

People's investments decisions are susceptible to emotions, so they might pursue rises and kill falls and buy high and sell low. But  AIP is a disciplined investment implemented punctually to avoid changing long-term investment strategy due to temporary market fluctuations.

3. A long-term investment with compound interest

Every time you make a profit by an AIP, the profit will get into a new round of AIP and repeat this cycle. A long-term investment will achieve the power of compounding to accumulate a sizable wealth.

4. Automatic implementation and time-saving

There are many fund-selling apps nowadays (such as moomoo) supporting a customized AIP. The system will enforce automatic deductions punctually as long as you correlate them with your bank account. It is simple and convenient and you do not need to do it manually.

While the AIP has many advantages, it would be better not to enter the market when the price of a fund is high. Otherwise, it might take a long time to earn its cost.

The content in this article is intended for general circulation and informational purposes only. It does not take into account the investment objectives, financial situation or needs of any particular person and should not be relied on as advice or recommendation. Information provided in this article are not specifically intended for or specially targeted at the public in any specific jurisdiction. Neither Moomoo Inc. nor its affiliates are licensed Financial Advisers and do not provide financial advice. You are advised to consult your financial adviser before making any commitment to invest in any capital markets product. The information published is not and does not constitute or form part of any offer, invitation or solicitation to subscribe or to enter into any transaction in capital markets products. Moomoo is a professional trading app offered by Moomoo Inc. In the U.S., investment products and services on Moomoo are offered by Futu Inc., Member FINRA/SIPC. In Singapore investment products and services are offered through Futu Singapore Pte. Ltd., regulated by the Monetary Authority of Singapore (MAS). This advertisement has not been reviewed by the MAS. Moomoo Inc., Futu Inc. and Futu Singapore Pte. Ltd are affiliated companies. Any illustrations, scenarios, or specific securities referenced herein are strictly for illustrative purposes. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal.

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