Periodic Payment Plan

DEFINITION of 'Periodic Payment Plan'

A type of investment plan, often sold to military personnel, that allows an investor to accumulate shares of a mutual fund indirectly by contributing a small, fixed sum over a period of usually 10, 15, or 25 years. In exchange for these payments, the investor owns an interest in a plan trust, which invests in a mutual fund. The plan trust's sponsor makes money by charging a "creation and sales charge", also known as a "front-end load", to investors. This sales charge is as high as 50% of the first 12 months' worth of payments, making periodic payment plans a potentially expensive investment option, especially for investors who do not remain invested for the full length of the plan.

BREAKING DOWN 'Periodic Payment Plan'

Most periodic payment plans also have an annual fee and small monthly custodial fees. As a result of these fees, investors may be able to get a better deal by purchasing mutual fund shares directly. While the low required monthly contribution may be a selling point of a periodic payment plan, some brokerage companies, whose fees may be lower than that of a periodic payment plan, will allow investors to make small monthly investments and avoid large minimum investments if they establish automatic deposits.



Also known as a "contractual plan" or "systematic investment plan".

RELATED TERMS
  1. Periodic Payment Plan Certificate

    A certificate representing ownership interest in a periodic payment ...
  2. Voluntary Accumulation Plan

    An investment method in which a retail investor periodically ...
  3. Spread-Load Contractual Plan

    A fee-payment structure applicable to mutual funds in which the ...
  4. SEC Form N-27F-1

    A filing with the Securities and Exchange Commission (SEC) that ...
  5. 529 Plan

    529 is a category of plans that provide tax advantages when saving ...
  6. Cumulative Discount Privilege

    A way that an investor in a mutual fund can qualify for lowered ...
Related Articles
  1. Trading

    How And When To Switch Your 529 Plan

    Just as with any investment, you should review your plan to make sure it's meeting your needs.
  2. Financial Advisor

    How to Know if Your 401(k) Plan Fees Are Too High

    Finding out how much you are paying for your 401(k) plan takes some research, but you should know exactly what you are getting for your money.
  3. ETFs & Mutual Funds

    How Mutual Fund Companies Make Money

    Read about the many different kinds of fees and sales charges mutual fund companies can use to generate revenue from those who invest in their shares.
  4. Financial Advisor

    Helping 401(k) Plan Sponsors with Costs

    Even the most savvy advisors and plan sponsors have trouble navigating 401(k) fees and costs. Monitoring them and working with plan providers can help.
  5. Retirement

    Do You Have a Crummy 401(k)?

    High-cost, outdated plans can keep your retirement portfolio from thriving. Here's what to do – and the 2015 Supreme Court case that could help.
  6. Financial Advisor

    The 4-1-1 on 403(b) Plans

    These plans resemble 401(k) plans in many respects, but are specially designed for nonprofit entities.
  7. ETFs & Mutual Funds

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  8. ETFs & Mutual Funds

    5 Signs That You Have a Lousy 401(k) Plan

    Knowing whether a 401(k) plan is good or not so good is important. This will help participants decide how much to invest and when to demand improvements.
  9. Investing

    Fund Costs and Expenses

    How much a fund charges for its services is the most important indicator of how well it will perform.
  10. ETFs & Mutual Funds

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
RELATED FAQS
  1. How do I save for retirement as a self-employed individual?

    What are my options for saving for retirement? I was thinking about starting an IRA. ... Read Answer >>
  2. What are typical trust fund management fees?

    Learn about trust fund management fees, such as the annual management fee, annual expense ratio, brokerage commissions and ... Read Answer >>
  3. When are mutual funds considered a bad investment?

    Learn when mutual funds are considered a bad investment for investors who worry about high expenses, lack of control over ... Read Answer >>
  4. Where do I look for fees that I am charged on investments? What are those fees called?

    The fees and expenses charged for investments vary. The fees usually depend on the type of investment and the investment ... Read Answer >>
  5. Does OptionsHouse have mutual funds?

    Learn about how investors can buy shares in mutual funds through OptionsHouse. Read how investors need to call the brokerage ... Read Answer >>
  6. What are qualified retirement plan types?

    Understand the different types of qualified retirement plans and what they mean in terms of employee and employer contribution ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center