Systematic Investment Plan - SIP

AAA

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).

RELATED TERMS
  1. Dollar-Cost Averaging - DCA

    The technique of buying a fixed dollar amount of a particular ...
  2. Automatic Investment Plan - AIP

    An investment program that allows investors to contribute small ...
  3. Dividend Reinvestment Plan - DRIP

    A plan offered by a corporation that allows investors to reinvest ...
  4. Average Down

    The process of buying additional shares in a company at lower ...
  5. Voluntary Accumulation Plan

    An investment method in which a retail investor periodically ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  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. How do no-load funds typically perform relative to load funds?

    No-load mutual funds are pooled investments that do not carry an upfront sales charge when purchased or a deferred sales ... Read Full Answer >>
  3. What are the most popular mutual funds that invest primarily in the insurance sector?

    Under the purview of the financial services industry, the insurance sector is an attractive investment option for mutual ... Read Full Answer >>
  4. How should I use portfolio turnover to evaluate a mutual fund?

    The portfolio turnover percentage can be used to determine the extent to which a mutual fund turns over its stocks and assets ... Read Full Answer >>
  5. What are the risks involved in a banker's acceptance?

    College savings accounts are excellent ways to encourage saving for future college costs. Contact your investment professional ... Read Full Answer >>
  6. For what reasons are electronics stocks commonly purchased by a value investor?

    Administered by the Financial Industry Regulatory Authority (FINRA), the Series 6 exam – Investment Company and Variable ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    The Perks Of Dividend Reinvestment Plans

    These plans offer shareholders a way to directly invest in some of the top companies without the commissions.
  2. Options & Futures

    How Much To Save To Become A Millionaire

    With a little discipline and the help of some powerful savings vehicles, anyone can hit this mark.
  3. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  4. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  5. Professionals

    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.
  6. Entrepreneurship

    Why Small Business Owners Need Financial Advisors

    Small business owners are too busy to effectively manage their own money. That's why a financial advisor can be a big help.
  7. Professionals

    401(k) Risks Advisors Should Know About

    Lawsuits are challenging the the fiduciary duty of plan sponsors related to 401(k) fees. Here's what financial advisers should know.
  8. Retirement

    Is Your Retirement Plan On Track?

    Sooner or later that day will come. Do you know if you're ready? Here's how to tell and what to do if your trajectory needs a course correction.
  9. Retirement

    What New Grads Need To Do On Their First Job

    It's never too early to start saving aside something for retirement. But what purpose could a retirement account serve when someone just started working?
  10. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center