Mutual Fund vs SIP

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Difference between Mutual Fund and SIP

In mutual fund vs SIP, the mutual fund is an investment vehicle, and SIP (Systematic Investment Plan) is a method of investing in mutual funds. Opting for SIP ensures channelizing a consistent sum of money in a predefined periodic manner into a mutual fund. It contrasts with the one-time lump-sum investment in a mutual fund because SIP enables step-by-step investment to progress gradually in an investor-friendly and convenient way.

Table of contents
  • In terms of mutual fund and SIP difference, the primary point is that mutual fund is an investment product; in contrast, SIP is an investment mode for investors looking for discipline and systematic money management. Investors can choose the lump-sum method or SIP to invest in the mutual fund.
  • The mutual fund is an investment vehicle formed by pooling money from investors and investing the collected money in different securities or companies' stocks.
  • SIP stands for Systematic Investment Plan, a method offered by mutual funds to let investors invest a small fixed amount of money in a mutual fund at regular intervals.
  • There are many pros and cons, hidden costs, and regulations necessary for every investor to know about; since it is financial instrument related, every investor must study the terms and conditions of a mutual fund or SIP before investing.

Comparative Table

ParticularsMutual FundSIP
MeaningIt refers to an investment vehicle managed by an asset management company. It bundles the securities purchased by pooling money from different investors.SIP is a scheme or plan offered by the asset management companies to enable the regular investing of a fixed small amount in a mutual fund.
PurposeForming a portfolio of different securities ensures diversification and simplifies portfolio management.Ensure disciplined investing. It Introduces a predefined track streamlining an investor's investment and helps the investor gradually step towards the investment goals.
TypesEquity funds, money market funds, fixed-income funds, index funds, balanced funds, income funds, global funds, specialty funds, etc.Regular SIP, top-up SIP, flexible SIP, perpetual SIP, trigger SIP, SIP with insurance, multi-SIP, etc.
Time periodNo minimum tenure. An investor can invest in a mutual fund minimum for a day or maximum for as long as the investor wish.No fixed tenure. There are different timeframes. For example, it can end at six months, one year, three years, or five years.
Risk appetiteModerate to high-risk exposure. The lump-sum method is favorable in a continuously growing market.Low to moderate. Less preferred in a continuously growing market.
Frequency of investmentFlexible. In the lump-sum method, it is a one-time investment.Investment via SIP involves periodic input, and non-payment can lead to termination.
ExpenseAnnual operating fees or expense ratio usually falls between 0.5% to 1.5% for actively managed funds and 0.2% for passively managed funds. SIP charges are expensive. For instance, it is close to half the investment amount for the first 12 months.

What is Mutual Fund?

A mutual fund is an investment product created by collecting money from many investors and investing the money collected in different securities. Investors invest their money as per their interest, and the money managers manage the mutual fund's portfolio.  

Mutual funds favor the inclusion of diverse securities to ensure diversification. Common items include stocks, bonds, and short-term debts. Also, there are different types of mutual funds available. For example, an equity fund focuses on investing in stocks of different companies, a bond fund or debt fund focus on investing in bonds and other debt instruments, and hybrid funds contain investments in more than one asset class. Advantages of investing in the mutual fund are access to professional portfolio management, risk diversification, convenience, and dividend reinvestment. Disadvantages include high fees and fluctuating returns.

What is SIP?

SIP (Systematic Investment Plan) allows investors to make regular and timely investments in their preferred mutual fund, trading account, or retirement account. Investors with no lump-sum money generally choose this mutual fund investment method, one of the points explaining mutual fund sip vs lump-sum. Most mutual funds offer the SIP service, and investors generally search "mutual fund vs sip which is better" or "which is the best sip mutual fund to invest in" to get a better idea before investing. Furthermore, stock sip vs mutual fund sip explains that, in stock SIP, the stock is bought, unlike mutual fund SIP dealing with mutual funds.

According to financial goals and retirement objectives, SIP lets people plan their long-term investments. A SIP is helpful because investors use it as a strategy to minimize the risk of market volatility and, at the same time, offer the convenience of investing a small predefined amount of time periodically like weekly, monthly, or quarterly. Different SIPs are available in the mutual fund scheme, like regular SIP, top-up SIP, flexible SIP, perpetual SIP, trigger SIP, SIP with insurance, multi-SIP, etc. SIP is also for people who want to induce an investing discipline in them. A new investor can start a SIP for six months, but it is always advised that people should stay in the market for a long time to enjoy more returns.

Mutual Fund vs SIP - Infographics

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