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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Selection

A distributor is advising a client with a 10-year horizon who wants to invest through monthly contributions in an equity scheme and is anxious about market timing. Which approach best addresses the concern?

Investing through a Systematic Investment Plan best addresses the concern. An SIP puts in fixed amounts regularly, buying more units when prices are low and fewer when high, which averages the purchase cost and removes the need to time the market over a long horizon.

  1. AWait for the market to fall before investing a lump sum
  2. BInvest through a Systematic Investment Plan to average the purchase costCorrect
  3. CInvest only in a liquid fund for ten years
  4. DSwitch the entire amount between sectors every month

Explanation

An SIP invests fixed amounts at regular intervals, buying more units when NAV is low and fewer when high, reducing the impact of timing. Waiting for a fall is market timing, and the other options do not suit a 10-year equity goal.

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