Accumulation Plan

DEFINITION of 'Accumulation Plan'

1. A general financial strategy in which an investor attempts to build the value of his or her portfolio to a desired size.

2. In the context of mutual funds, a formal arrangement in which an investor contributes a specified amount of money to the fund on a periodic basis. By doing so, the investor accumulates a larger and larger investment in the fund through his or her contributions and the increase in value of the fund's portfolio.

BREAKING DOWN 'Accumulation Plan'

1. A prudent accumulation plan is key to building a financial nest egg for retirement. Many investors accumulate investment funds with regular contributions and the reinvestment of dividends and capital gains. Generally, the goal is to keep funds invested, reinvest income and capital gains, and have these compound for as long as possible.

2. An accumulation plan can be useful for investors who wish to build their positions in a mutual fund over time. It also provides the benefits of dollar-cost averaging.