Investment Plans

Investment plans generally refers to the services that the funds provide to investors offering different ways to invest or reinvest. Investment Plans are generally the different methods by which investor can invest in a fund. The famous amongst all investment plans are SIP(Systematic Investment Plan).
Some of investment plans offered by mutual funds in India are:

1. Automatic Reinvestment Plans (ARP)
2. Systematic Withdrawal Plans (SWP)
3. Systematic Transfer Plans (STP)
4. Value Averaging Investment Plan (VIP)
5. Systematic Investment Plans (SIP)

          Definitions Of Various Investment Plans

1. Automatic Reinvestment Plans (ARP) -  Mutual Funds generally offer two options under the same scheme - the Dividend Option and the Growth Option. The Growth Option or the Automatic Reinvestment Plan allows the investor to reinvest in additional units the amount of dividends or other distributions made by the fund, instead of receiving them in cash. Reinvestment takes place at the ex-dividend NAV. The ARP ensures that the investor reaps the benefit of compounding in their investments.

2. Systematic Withdrawal Plans (SWP) -  It provides the benefit of a regular income. It allows the investor to make systematic withdrawals from his fund investment account on a periodic basis. The investor must withdraw a specific minimum with the facility to have withdrawal amounts sent to him. The investor is usually required to maintain a minimum balance in his fund account under this plan. Investors should note that SWPs are different from Monthly Income Plans.

3. Systematic Transfer Plans (STP) -  These plans allow the investor to transfer on a periodic basis a specified amount from one scheme to another within the same fund family - meaning two schemes managed by the same AMC and belonging to the same fund. It is necessary for the investor to maintain a minimum balance in the scheme from which transfers are made. The services allows the investor to manage his investments actively to achieve his objectives. Many funds do not charge any transaction fees for this service.

4. Value Averaging Investment Plan (VIP) -  Value averaging is a technique of adding to an investment portfolio to provide greater return. Value averaging is a formula based investment technique where a mathematical formula is used to guide the investment of money into a portfolio over time. In periods of market declines, the investor contributes more, while in periods market climbs, the investor contributes less. After the investment has over-performed, the investor will be required to buy less or sell high. After the investment has under-performed, the investor will be required to buy more. Some research suggests that the method results in higher results at a similar risk, especially for high market variability and long time horizons.