Series V-AEasyInvestor Services

What is a Systematic Investment Plan (SIP) in the context of mutual funds?

AA plan that redeems a fixed amount at regular intervals
BA facility to invest a fixed amount at regular intervals, benefiting from rupee-cost averagingcheck_circle
CA guaranteed-return product offered by AMCs
DA one-time lump-sum investment in an equity scheme

Correct answer

B. A facility to invest a fixed amount at regular intervals, benefiting from rupee-cost averaging

lightbulbDetailed Solution

A SIP lets an investor commit a fixed sum at regular intervals (e.g. monthly). By investing across market levels it averages the purchase cost per unit over time (rupee-cost averaging) and instils investing discipline. A plan that withdraws periodically is an SWP, not a SIP.

Reference: NISM Series V-A Mutual Fund Distributors, Chapter 5.

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