Investment plans for a mutual fund investor in India

The investment plans are different ways to invest or re-invest in a scheme by investors. These are services offered by different mutual funds to their investors. These plans provide variable degree of convenience and flexibility to the investors. The convenience could be in the form of freedom to invest at regular intervals or making withdrawals periodically. Similarly flexibility may be offered by allowing investors to transfer from scheme to another.

SIP:- (Systematic investment plan) this is a plan based on the concept of “rupee cost averaging”. In this plan the investor is allowed to invest a fixed amount at regular intervals. This gives the investor a way to save and to invest in a disciplined manner. The investment can be made by giving post- dated cheques or by facility of direct debit to the investors salary account.

ARP:- (automatic reinvestment plan) as in reinvestment the investor has two option-dividend or growth. So in automatic reinvestment plan it offers the investors to reinvest the amount of dividend instead of receiving it in cash. This reinvestment may either be in the same scheme or into other scheme of the same fund. The reinvestment will happen at the ex-dividend NAV.

STP:- ( systematic transfer plan ) this plan gives investor the facility to transfer on a periodic basis a specific amount from one scheme to another scheme of the same fund. A transfer from one scheme will mean redemption of units from that scheme and, likewise, it would be consider as an investment in units of the scheme to which the transfer is made. This redemption and reinvestment would happen at the applicable NAV’s. This plan gives investor the leverage to manage his funds among different schemes to achieve his objectives.

SWP:- ( systematic withdrawal plan ) this is a plan whereby an investor can make systematic withdrawals from his fund investment accounts on a periodic basis. This facility helps him to ensure regular cash inflow. In this plan the investor agrees a certain amount to be withdrawn and credited to his bank account on a periodic basis. The amount withdrawn is treated as redemption of units by investors and the units are calculated using the applicable NAV as specified in the offer document.