Systematic Investment Plan - SIP

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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.

INVESTOPEDIA EXPLAINS '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).

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RELATED FAQS
  1. What are the benefits and costs (or risks) of a systematic investment plan (SIP)?

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  2. Are so-called self-offering and self-management covered by "Financial Instruments ...

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  3. I'm in my 50s. Should I still participate in my company's Roth 401(k)?

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    Typically, commissions or other sales charges may apply when a mutual fund is sold. This is an important factor in deciding ... Read Full Answer >>
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