A periodic payment plan is a regular investment plan whereby an investor contributes a fixed sum of money at fixed intervals (usually monthly) to a mutual fund. The money is then used to purchase units in the fund, which are then held by the investor.
The main advantage of a periodic payment plan is that it allows investors to dollar-cost average their investments, which can help to reduce the overall risk of the investment. This is because the investor is buying more units when prices are low and fewer units when prices are high, which smooths out the overall price fluctuations.
Another advantage of periodic payment plans is that they can help to discipline investors by forcing them to make regular investments. This is because the investor is committed to making regular contributions and cannot simply stop investing when markets are down.
The main disadvantage of periodic payment plans is that they can be inflexible, as the investor is committed to making regular contributions regardless of market conditions. This can be a problem if the investor needs to access their money early, as they may be forced to sell units at a loss in order to withdraw the money.
Overall, periodic payment plans can be a helpful tool for investors who are looking to dollar-cost average their investments and who are willing to commit to regular contributions. However, it is important to be aware of the potential drawbacks before investing in one of these plans. What is a minimum periodic payment? A minimum periodic payment is the smallest amount of money that you can contribute to a mutual fund on a regular basis. For example, if you have a mutual fund with a $25 minimum investment, you can contribute as little as $25 per month to that fund. Which term is not related with mutual funds? The term "front-end load" is not related to mutual funds. How many types of funds are there? According to the Investment Company Institute, there were 8,836 mutual funds in the United States as of December 31, 2019. This total includes both stock and bond funds.
Stock mutual funds can be further divided into several subcategories, including domestic, international, and sector funds. Bond funds can also be further divided into subcategories, including government, corporate, and high-yield funds.
There are also a variety of other types of funds, including money market funds, index funds, and exchange-traded funds (ETFs). What is referred to as a sequence of equal periodic payments made to regular interval? A sequence of equal periodic payments made to a regular interval is commonly referred to as an annuity. An annuity can be either a fixed annuity, where the periodic payments are fixed, or a variable annuity, where the periodic payments can vary.
Is SIP monthly or yearly?
There is no one-size-fits-all answer to this question, as the answer will depend on the specific mutual fund in question. However, many mutual funds offer a monthly or yearly subscription plan, which allows investors to make regular contributions to the fund.