Systematic Investment Plan - SIP


DEFINITION of 'Systematic Investment Plan - SIP'

This is a plan where investors make regular, equal payments into a mutual fund, trading account or retirement account, such as a 401k. By using a systematic investment plan (SIP), investors are benefitting from the long-term advantages of dollar-cost averaging and the convenience of saving regularly without taking any actions except the initial setup of the SIP.

BREAKING DOWN 'Systematic Investment Plan - SIP'

Dollar-cost averaging involves buying a fixed-dollar amount of a security regardless of its price. Therefore, shares are bought at various prices over time and the average cost per share of the security will decrease over time. Dollar-cost averaging lessens the risk of investing a large amount of money into a security. In addition to SIPs, many investors reinvest dividends received from their holdings back into purchasing more stock, called dividend reinvestment plans (DRIPs).

  1. Automatic Investment Plan - AIP

    An investment program that allows investors to contribute small ...
  2. Dollar-Cost Averaging - DCA

    The technique of buying a fixed dollar amount of a particular ...
  3. Voluntary Accumulation Plan

    An investment method in which a retail investor periodically ...
  4. Average Down

    The process of buying additional shares in a company at lower ...
  5. Dividend Reinvestment Plan - DRIP

    A plan offered by a corporation that allows investors to reinvest ...
  6. Benchmark

    A standard against which the performance of a security, mutual ...
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  1. What are the benefits and costs (or risks) of a systematic investment plan (SIP)?

    A systematic investment plan (SIP) is used to invest a specified dollar amount on a predetermined schedule. For example, ... Read Full Answer >>
  2. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  3. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
  4. Are catch-up contributions included in actual deferral percentage (ADP) testing?

    Though the Internal Revenue Service (IRS) carefully scrutinizes the contributions of highly compensated employees (HCEs) ... Read Full Answer >>
  5. Who offers 401(k) plans?

    401(k) plans are one of the most common retirement plans available. A 401(k) plan must be offered by a business. These plans ... Read Full Answer >>
  6. Can a 401(k) be used for a house down payment?

    A 401(k) retirement plan can be tapped to raise a down payment for a house. You can either borrow money or make a withdrawal ... Read Full Answer >>

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