Investor Protection Guide: Systematic Investment Plan (SIP)

Systematic Investment Plans (SIP) are regulated as Periodic Investment Plans under the federal securities laws. The primary objective of a SIP is to enable investors to clearly define an investment goal and then to help them reach it. While the majority of these plans are sold to military personnel, they are also sold to civilians. These plans allow you to accumulate shares of a mutual fund indirectly by making small regular monthly payments, usually as little as $50, over a period of 10, 15 or 25 years. Individual plans can differ from one another. For a specific type of systematic investment plan—sometimes referred to as a contractual plan or periodic payment plan—an investor must make a long-term commitment of 10 or 15 years. These plans come with high upfront costs and are expensive if the full term of payment is not completed. Investors should beware of SIP policies containing misleading claims.

For more information, see:

• Financial Industry Regulatory Authority (FINRA): http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/MutualFunds/P012785 FINRA’s investor alert on Systematic Investment Plans—Educate Yourself Before You Enlist.
• The Securities and Exchange Commission (SEC): http://www.sec.gov/investor/pubs/perpayplans.htm The Securities and Exchange Commission's information on Periodic Payment Plans.