Cumulative Investment Plan (CIP)
By Fateen Tahseen Alam
Analyst
EDGE AMC Limited
Posted on: 26 Dec, 2023
The CIP is a dividend reinvestment plan, where dividend payout is used to buy—
- new units (Dividend Reinvestment Option), or
- more securities, e.g., stocks, debt instruments, etc. (Growth Option)
The option to buy new units with a dividend payout is commonly called the Dividend Reinvestment Option, and the option to buy more securities is called the Growth Option. However, because of sharing the same impact on the total return, both options are considered growth boosters.
Essentially, when a dividend payout is announced, investors have the option to get new units issued against their due dividend or let the fund reinvest it in more securities instead of taking the dividend in cash.
To learn more about mutual funds, you may read our guide on mutual fund investing.
- Tags:
- Mutual fund, investing, saving, growth, dividend
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