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Ch.9 · KYC and Folio Management · easy

What is the primary benefit of a SIP compared to a lump sum investment in an equity mutual fund?

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EXPLANATION

SIP enables rupee-cost averaging — a fixed amount buys more units when NAV is low and fewer when NAV is high. This reduces the average cost per unit over time but does not guarantee returns or eliminate risk.

A.SIP guarantees higher returns than lump sum

B.SIP eliminates all market risk

C.SIP leverages rupee-cost averaging by buying more units when NAV is low [✓ Correct]

D.SIP investments are exempt from capital gains tax

EXPLANATION

SIP enables rupee-cost averaging — a fixed amount buys more units when NAV is low and fewer when NAV is high. This reduces the average cost per unit over time but does not guarantee returns or eliminate risk.

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