Automatic Investment Plan (AIP)

Written By
Paul Tracy
Updated July 17, 2021

What is an Automatic Investment Plan (AIP)?

An automatic investment plan (AIP) is a strategy whereby an investor can arrange for funds to transfer into an investment account automatically on a regular basis.

How Does an Automatic Investment Plan (AIP) Work?

Let's assume you want to save money for a down payment on a house. You could A) attempt to set aside whatever money you have left at the end of the month, or B) implement an automatic investment plan into a savings account

Here's how it works: 

Each month, on the same day of the month, the bank deducts a predetermined amount of money from your checking account and deposits it into a savings account. That money then compounds over time.

Dividend reinvestment plans -- where investors use dividends to purchase more shares of the stock paying the dividends -- are one common type of automatic investment plan. Employees who contribute to their 401(k)s are also taking part in an automatic investment plan, whereby their employers deduct a specific amount from every paycheck and automatically deposit it into a retirement account. 

Why Does an Automatic Investment Plan (AIP) Matter?

Automatic investment plans can help investors maintain their discipline and accumulate thousands of dollars they otherwise may not have saved or invested. Through these plans, investors can save for retirement, fund college educations or a much-needed vacation.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Automatic Investment Plan (AIP).
Be the first to ask a question

If you have a question about Automatic Investment Plan (AIP), then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Automatic Investment Plan (AIP), then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Automatic Investment Plan (AIP)

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms