Final answer:
The purchase plan that allows investors to make scheduled, regular investments in mutual funds with small amounts of money is called a Systematic Investment Plan (SIP). This plan benefits from dollar-cost averaging and is ideal for long-term financial goals.
Step-by-step explanation:
The type of purchase plan that allows retail mutual fund investors to make pre-arranged regular purchases in small dollar amounts is known as a Systematic Investment Plan (SIP). SIP is a method of investing in mutual funds in a disciplined and incremental manner. It enables investors to allocate a certain fixed amount of money at regular intervals to a mutual fund of their choice, making it convenient and manageable for individuals to build a diversified portfolio over time.
In the context of mutual funds, investing through a SIP can be particularly advantageous, as it applies the principle of dollar-cost averaging. When investors make regular investments over time, they buy more units when prices are low and fewer units when prices are high, which can potentially lead to a lower average cost per unit. This disciplined approach to investing can be especially beneficial for long-term financial goals, such as retirement savings or accumulating funds for a pension.