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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Fund Distribution and Channel Management Practices

Which of the following is a feature of a Systematic Investment Plan (SIP) that a distributor can correctly highlight to a salaried client?

A distributor can correctly say that a SIP encourages disciplined investing and averages the cost of purchase through rupee cost averaging, as more units are bought when NAV is low. It neither guarantees returns nor removes market risk.

  1. AIt guarantees a minimum return on every instalment
  2. BIt promotes disciplined investing and averages the purchase cost over time through rupee cost averagingCorrect
  3. CIt eliminates all market risk in equity schemes
  4. DIt allows units to be bought only at the highest NAV of the month

Explanation

A SIP invests a fixed amount at regular intervals, buying more units when NAV is low and fewer when high, which averages the cost. It does not guarantee returns or remove market risk, and units are bought at the applicable NAV, not the highest.

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