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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Investor Services

Mr. Sharma invests in a mutual fund scheme through a Systematic Investment Plan (SIP). Which of the following is a feature of the SIP that a distributor should explain correctly to him?

In a SIP, a fixed amount is invested at regular intervals, so more units are bought when the NAV is low and fewer when it is high. This averages the purchase cost, but SIP offers no guaranteed return.

  1. ASIP guarantees a minimum return irrespective of market movement
  2. BFixed instalments buy more units when NAV is low and fewer when NAV is highCorrect
  3. CSIP can be started only in debt schemes
  4. DSIP instalments must always be paid in cash at the AMC office

Explanation

Investing a fixed sum at regular intervals buys more units when NAV is low and fewer when high, which averages the cost of purchase (rupee cost averaging). SIP does not guarantee returns, is available in many scheme types, and is usually paid through bank mandates.

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