As you are reading this post, I am sure you must have heard about the phrase "AIP". It is quite normal to scratch your mind wondering what could mean "AIP" at first glance. In fact, I also have had a puzzling feeling when the first time ever, I encountered this word. But, a piece of good news is that API meaning is quite simple to understand. These are the words "API" stands for Automatic Investment Plan.
To help you understand the difference between an Automatic Investment Plan and a regular investment plan, I am going to answer some of the commonly asked questions about AIPs. Also, you will get an overview of simple steps to set up your AIP accounts. So, let's go over this in more detail step by step.
What is the Automatic Investment Plan (AIP)?
Many of you might have got an idea about AIPs. As the name suggests, an Automatic Investment Plan is such a way of investment in which investors can invest their money automatically. If we say more specifically, AIPs enable investors to invest their money at some regular intervals and in a systematic way. In other words, we can call it a feature rather than a financial product or asset.
The best part of AIPs is that it enables the automatic deduction from the bank account. It means, whenever required and according to fixed settings, money automatically is deducted from the investors' bank account. Also, it supports the payments through an individual's paycheck or paid out from a personal account which is linked with AIPs.
The best example of AIPs is pension funds, life insurance plans, and many long terms of investment plans where the investors need to pay a premium for a long period of time.
Is Automatic investing a good idea?
There is no straightforward answer to this question. It may be beneficial for many professional investors and at the same time for other investors, it may be risky. So, let's first have a look at the benefits of AIPs.
Timely Payments: In everyday life, it is quite normal to forget the deadline for paying a premium. And exceeding a deadline means facing a penalty that may be devastating for your investment strategy. So, to avoid such kind distressing issues, you must consider AIP.
User-Friendliness: The second major benefit is user-friendliness that comes with AIPs. This feature is quite simple and easy to implement. Once you enable this feature, you can stay hassle-free.
Save Time & Energy: After money, if there is something which is most important is time. If you value your time, AIPs can do wonder for you. In just a few simple taps, you can set the date and timing according to your pre-decided portfolio and fixed payment scheduled.
As far as the disadvantage of AIPs is concerned, be informed that enabling this feature means the dedicated amount is automatically deducted from the account holder account without your prior notification. So, just think of a situation when you are short on money, and the deduction of money from your account will deteriorate the already bad situation.
Does Fidelity have automatic investments?
Yes. Fidelity users will be glad to know that Fidelity offers AIP features to its users. It is quite simple to set up and free as well. You can set up monthly, quarterly, or semiannual investments into your brokerage, retirement, 529 savings, or other eligible Fidelity accounts. Moreover, transfer money from your bank on a regular basis to provide cash for investing or everyday spending. Also, you purchase additional shares of mutual funds you already own.