Key Difference Between SIP and Mutual Fund

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  • 22 Jun 2023

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 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.


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.

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