An automatic investment plan (AIP) is a method wherein investors can contribute a small amount of money to their investment account in a pre-set portfolio. The process involves the automatic deduction of funds from the investor’s pay check or personal account and into the investment scheme selected by the investor. This is typically done at a weekly, monthly, or quarterly interval, which is often decided by the investor at their convenience and according to their investment goals. The idea of an auto invest plan is to establish a routine of saving and to regularly invest with no extra effort on the investor’s part.

Employer-sponsored automatic investment plans

Most employers provide a wide range of automatic investment options through their benefit programs to support employees' long-term and short-term investment goals. Some of the most common employer-sponsored automatic investment plans in India include the National Pension System (NPS), Employees’ Provident Fund (EPF), gratuity fund, and superannuation fund.

These schemes automatically deduct contributions from employees' salaries to help them build retirement savings. NPS and EPF provide systematic investment in diversified financial instruments, whereas gratuity and superannuation funds provide lump sum benefits at retirement. Each of these automatic investment plans offers tax benefits and is regulated by respective authorities to ensure financial security for employees upon their retirement. Investors opting for an employer-sponsored program often experience lower fees and save money on transaction costs.

Automatic investment plans for individuals

Automatic investment plans (AIPs) are a convenient and disciplined way for individuals to invest regularly without the need for constant monitoring or manual transactions. These plans automate the investment process by deducting a fixed amount from your bank account at predetermined intervals (e.g., weekly, monthly, quarterly) and investing it in your chosen financial instrument.

Here are some popular automatic investment plans available for individuals:

1. Systematic Investment Plan (SIP): SIPs are the most common type of AIP, primarily used for investing in mutual funds. You can choose a mutual fund scheme and invest a fixed amount at regular intervals. This allows you to average out your purchase price over time and benefit from rupee cost averaging.
2. Systematic Transfer Plan (STP): STPs are similar to SIPs, but instead of investing a fixed amount directly into a mutual fund, you first invest a lump sum in a liquid or debt fund and then transfer a fixed amount to an equity fund at regular intervals. This is suitable for investors who want to gradually shift their investments from less risky assets to higher-risk assets.
3. Automatic Recurring Deposits (RD): RDs are offered by banks and post offices, allowing you to invest a fixed amount every month for a predetermined tenure. They offer fixed returns and are a safe option for risk-averse investors.

If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

Automatic investment plan advantages

An automated investment plan can be a great way to simplify your investment strategy and ensure your investments are working for you. Here are some of the benefits of automating your investment plan with an AIP.

1. Streamlined process: Automating your investment plan with an AIP eliminates the need to manage your investments manually. This means you can set up your AIP once and then forget about it, staying assured that your investments are being managed for you.
2. Reduced risk: Opting for an AIP can help reduce the risk of making mistakes or missing out on potential opportunities. By automating your investments, you can ensure that your investments are diversified and you are taking advantage of the best opportunities available.
3. Increased returns: An automatic investment plan can help you maximise your returns. By automating your investments, you can ensure that your investments are working for you and that you are capitalising on favourable opportunities.
4. Integrating technology: The incorporation of advanced algorithms, artificial intelligence, and machine learning in automated investment programs has helped optimise portfolio management and streamline the investment process. It has enabled investors to easily access favourable strategies that were once accessible only to the wealthy.
5. Enhanced transparency: Automatic investment plans often provide clear, easy-to-understand information about performance, fees, and investment strategies. This transparency helps demystify the investing process and build trust among investors.
6. Avoids emotional investing: Following an investment plan can be challenging when emotions are high. You may be drawn to cut your losses and pull your investments when the market dips. Emotions may also drive you to make impulsive decisions for certain investments when doing so may not be necessarily wise. Automatic investing helps keep your emotions out of your portfolio so you can stay on track regardless of your feelings.
7. Diversified portfolio: An AIP can also help you reach your financial goals while allowing you to invest in a diversified portfolio. This means that you can invest in various asset classes, such as bonds, stocks, and mutual funds. Since AIP spreads your investments across different assets, you reduce the risk of investing in the stock market.

Also read: Smart investments

Automatic investment plans have gained traction in recent years as a powerful tool for making wealth management accessible to a broader audience. The appeal of this investment method lies in its convenience, simplicity and affordability. It eliminates the need for investors to depend on expensive financial advisors or navigate the complexities of the stock market by themselves. With only a few clicks, they can access professionally managed portfolios structured to optimise returns and minimise risks. With the right plan, investors can benefit from the power of compounding returns and the potential for higher returns over time.

If you wish to accumulate wealth without worrying about market risks, Consider Bajaj Finance Fixed Deposits (FDs), offering competitive interest rates up to 8.60% p.a., with flexible tenures to suit your financial goals. Starting with a minimum investment of just Rs. 15,000, you can enjoy assured returns and peace of mind knowing your investment is safe from market fluctuations.