• Invest
    Investment Suite
    Stocks
    Mutual Funds
    Future and Options
    IPO
    Exchange Traded Funds
    Commodity
    Stockcase (Stock Baskets)
    Currency
    Non Convertible Debentures
    Sovereign Gold Bond
    Exclusive
    NRI Account
    Private Client Group
    Features
    SipIt
    MTF
    Investment Suite
    Exclusive
    Features
  • Platform
    Product Suite
    Kotak Neo App & Web
    Nest Trading Terminal
    NEO Trade APIs
    Features and Tools
    MTF
    Securities Accepted as Collateral
    Margin Requirements
    Payoff Analyzer
    Calculators
    SIP Calculator
    Lumpsum Calculator
    Brokerage Calculator
    Margin Calculator
    MTF Calculator
    All Calculators
    Product Suite
    Features and Tools
    Calculators
  • Pricing
  • Research
    Research Calls
    Long Term calls
    Short Term calls
    Intraday calls
    Derivatives calls
    Pick of the week
    Top Monthly Picks
    Research Reports
    Fundamental Research Report
    Technical Research Report
    Derivative Research Report
    Research Calls
    Research Reports
  • Market
    Stocks
    Market Movers
    Large Cap
    Mid Cap
    Small Cap
    Indices
    Nifty 50
    Bank Nifty
    FinNifty
    Nifty Midcap India
    VIX
    All Indian Indices
    Mutual Funds
    SBI Mutual Funds
    HDFC Mutual Funds
    Axis Mutual Funds
    ICICI Prudential Mutual Funds
    Nippon India Mutual Funds
    All AMC's
    IPO
    Upcoming IPO
    Current IPO
    Closed IPO
    Recently Listed IPO
    Stocks
    Indices
    Mutual Funds
    IPO
  • Learn
    Resource
    Market Ready
    Kotak Insights
    Infographic
    Podcast
    Webinars
    Youtube Channel
    Quarterly Results
    Investing Guide
    Demat Account
    Trading Account
    Share Market
    Intraday Trading
    IPO
    Mutual Funds
    Commodities
    Currency
    Futures & Options
    Derivatives
    Margin Trading
    Events
    Budget 2024
    Muhurat Trading
    Share Market Holiday
    Market Outlook 2024
    Resource
    Investing Guide
    Events
  • Partner
    Business Associates
    Fund Expert
    Kotak Connect Plus
    Startup connect
  • Support
    FAQs
    Circulars
    Bulletins
    Contact Us
    Forms Download
    Get your Statement
​

Key Difference Between SIP and Mutual Fund

  •  4m
  • 0•
  • 22 Jun 2023
Key Difference Between SIP and Mutual Fund

When a systematic investment plan (SIP) and mutual fund may seem similar at a first glance, in reality they aren’t. There are key differences between them and understanding them is essential to make crucial investment decisions. Read on to know how SIPs are different from mutual funds?

SIP is an investment strategy that allows you to periodically invest a fixed amount of money at regular intervals, typically monthly. SIPs allow you to invest in a mutual fund through regular installments rather than making a lump sum investment. The periodic investments in SIPs help in rupee cost averaging, which can mitigate the impact of market volatility.

A mutual fund is a professionally managed investment vehicle that pools money from multiple investors and invests in a diversified portfolio of securities such as stocks, bonds, or a combination of both. Investors purchase units or shares of the mutual fund, which represents their proportional ownership of the underlying portfolio. The fund is managed by a professional fund manager who makes investment decisions based on the fund's investment objectives.

SIP

  • SIP is a mode of investment in mutual funds
  • SIPs could be weekly, fortnightly, monthly, step-up, perpetual, trigger, multi, etc.
  • SIPs allow you to start small and are for all types of investors. You can start an SIP with as little as Rs. - 500 every month and increase it with time.
  • Also, you have the flexibility to increase or decrease the SIP amount, pause the investments temporarily, or even discontinue the SIP as per your convenience.
  • SIPs help you benefit from rupee cost averaging where you accumulate more units when markets are down and vice versa.
  • SIPs help counter market volatility by helping you remain invested across market cycles.
  • SIPs don’t generate returns. It’s the fund in which you do SIP generates returns.

Mutual Funds

  • Mutual fund is a pool of asset created by an asset management company
  • Mutual funds could be equity, debt, hybrid, etc.
  • Mutual funds allow you the flexibility to choose funds as per your choice. If you are an aggressive investor, you can invest in an equity fund. On the other hand, if you have a low risk tolerance, you can invest in debt funds.
  • With mutual funds, you have the flexibility to invest, redeem, or switch funds at any time, depending on the fund's terms and conditions.
  • Cost of investing in a direct plan of a mutual fund is lower compared to a regular plan. In a direct plan, there are no commissions paid to intermediaries whereas in a regular plan, the fund house has to pay commissions.
  • Equity mutual funds are more volatile compared to debt funds.
  • Mutual fund returns aren’t fixed and depend on various domestic and international factors.

Here’s another way to understand the SIPs Vs mutual fund difference. Suppose there’s a mutual fund, A. You do a SIP of Rs. 1,000 in this fund that’s generating an annual return of 10%. If you continue with your SIP for 10 years in this fund, the corpus at the end of 10 years could be around Rs. 2.6 lakhs.

To Sum Up

As you can see, SIP is a vehicle through which you invest in mutual funds. Mutual funds, on the other hand, are a pool of money that’s managed by professional investors. Through SIPs in mutual funds you can build a corpus for various short and long-term goals like an emergency corpus, downpayment for a house, children’s higher education and retirement, among others.

FAQs

SIPs are an investment method that allows individuals to invest a fixed amount regularly in a mutual fund scheme. On the other hand, mutual funds refer to investment vehicles that pool money from multiple investors to invest in various securities such as stocks, bonds, or commodities.

Yes, SIPs are available for most mutual fund schemes across various categories such as equity funds, debt funds, hybrid funds, etc. You can choose the scheme that aligns with your investment objectives.

No, SIPs do not guarantee higher returns. The returns generated by SIP investments depend on the performance of the underlying mutual fund scheme and the market conditions. However, SIPs provide the benefit of averaging the cost of investment, which can potentially mitigate the impact of market volatility.

Yes, you have the flexibility to modify or stop their SIPs at any time. They can increase or decrease the investment amount, change the frequency of investment, or even pause the SIP temporarily.

You should consider their investment horizon, risk tolerance, financial goals, and the overall market conditions before investing in a mutual fund.

Did you enjoy this article?

0 people liked this article.

What could we have done to make this article better?

Read Full Article >
Enjoy Free Demat Account Opening
+91 -

personImage
Enjoy Free Demat Account Opening
+91 -