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Which are the fund houses that offer VIP, where the amount invested more when the market is down and less when the market is up? Is it different from SIP?
- Sunil
Value Averaging Investment Plan (VIP) is a simple formula-driven approach that results in investing a higher amount when the market is lower and lesser amount when the market is higher. Though buying more when the market is low may result in higher returns, investors should have a lot liquid cash with them to enroll for a VIP. This is because investors will have to make extra investments whenever there is a big fall the in the market. This lack of predictability is one of the main reason why many average investors do not opt for VIP. However, Benchmark Mutual Fund (now Goldman Sachs), which introduced VIP, tried to overcome this issue by asking investors to give the maximum monthly debit amount so that they can manage their cash flows better.
A Systematic Investment Plan (SIP) allows an investor to invest a fixed amount regularly in a mutual fund scheme. Since most people have a predictable income and they know how much they can invest in a month, they are more comfortable with the idea of a regular SIP.
This article was originally published on January 11, 2016.
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