Mutual funds are the most common methods of investments that an individual knows of. While SIP is a part of Mutual Fund, the purpose of a SIP is to invest your money at regular intervals and gradually accumulate the corpus you want. It is actually quite simple. Let us look at the difference between SIPs and Mutual Funds in detail to understand better their relationship and role in investing. This article will highlight the difference between Mutual Fund and SIP.
What is a Mutual Fund?
As the name implies, a mutual fund is a group of assets maintained by an asset management company (AMC). In this, you can own fund units by their contribution.
With mutual funds, you have the option of investing in debt funds, equity funds, or hybrid funds, among others. You can make this decision according to your risk tolerance and financial objectives.
What is an SIP?
SIP stands for a systematic investment plan. It is a way of investing money in mutual funds that are investment schemes or vehicles. A mutual fund SIP allows you to invest consistently over time and build a corpus to achieve your various financial goals.
Difference between SIP and Mutual Funds
Now, as you can understand from SIP vs Mutual Fund, SIP is not distinct from mutual funds; instead, it is a component.
Here are some critical factors related to the difference between mutual funds and SIPs:
- Definition
A mutual fund is an investment vehicle, while an SIP is a mode of investing in a mutual fund. Other methods of mutual fund investment include lump sum payment, STP (Systematic Transfer Plan), etc.
- Cost
You can profit from cost averaging if you invest via SIPs. You may reduce your overall purchase value by purchasing more units whenever the market is down and fewer units when it is high.
Mutual fund investment can be done either systematically through SIPs or at once through a lump sum. With SIP, you get the advantage of rupee cost averaging. But with a lump sum, you acquire all the units at a higher price because you do not profit from cost averaging in this case.
- Flexibility
You have more freedom with SIP investing since you can invest little sums on a routine basis, perhaps weekly, quarterly, or monthly, as you see fit. As a result, SIPs are ideal for salaried individuals or those with consistent financial flows.
Mutual funds offer two separate modes of payment: SIPs enable you to invest money without disrupting your current lifestyle or spending habit. You can also make a lump sum payment if you have a large amount of money to invest in a fund.
- Volatility
New investors are sometimes perplexed about the ideal timing to approach the market. When investing a lump amount, there is always the issue of scheduling the purchase and, therefore, being exposed to high volatility.
With an SIP plan, the purchase is spaced out over time, so only a portion of your total investment is subject to higher-than-usual marketplace volatility.
Let us compare all the methods of investing in mutual funds to understand the benefits of SIPs. We will first discuss about SIP vs lump sum payment for mutual funds.
| Particulars | SIP | Lump Sum Payment |
| Definition | Regular payment | One-time payment |
| Cost | Less | High |
| Flexibility | High | Low |
| Volatility | Low impact | Comparatively higher impact |
Based on your asset allocation and risk profile, you must choose which mutual fund you wish to invest in. Next, you must choose the investing route: whether in a lump sum or systematically through SIPs.
Mutual Funds on Jupiter Money
Jupiter offers an online platform to invest in direct mutual funds without charging any commissions. If you’re an inexperienced investor, it is a great place to start your journey of investing in mutual funds. And if you are an experienced investor, Jupiter will help you find the best investment schemes.
Benefits of SIP
Systematic Investment Plans are pretty straightforward: you invest a fixed amount of money each month into mutual funds. They allow small amounts of money to accumulate over a long period into large amounts that contribute to overall wealth building.
Jupiter Money understands the need to have an effective way of investing in mutual funds. We provide you with a hassle-free way to invest in long-term mutual funds. With low fees and no charges, our SIP option allows you to invest in your desired scheme through Jupiter Mutual Funds and fulfill your long-term investment goals. On the Jupiter app you can invest in SIPs with a single swipe, also you can automate your SIP payments and not worry about penalties when low on balance. Jupiter smartly skips your SIPs when you are running low on balance to avoid penalties.
SIP Return Calculator
A Mutual Fund SIP Return Calculator is a tool available online that assists you in estimating the return you would earn after investing in a particular mutual fund regularly for a set amount of time. This is a handy tool for determining which fund to engage in.
Bottom Line
We hope this article has clarified the Mutual Funds vs SIP comparison. You should now be able to easily analyze SIPs vs Mutual Funds.
It is advisable to focus on your ideal asset allocation, keeping your risk profile and financial goals in mind. Do not fall into traps and make mistakes. If you want to make sure that your investments are stable and growing, then you should start planning out the end use of your assets, and that is why penning down your financial goals is so very important.
If you plan to invest in mutual funds, go the extra mile and research the ones you are interested in investing in.
The popularity of the Jupiter App has helped it win the trust of its customers. So, if you are looking for a safe place to invest your money, then Jupiter App is one of the best options that you can choose!
Frequently Asked Questions
- Which is better, SIP or Mutual Fund?
A Systematic Investment Plan (SIP) is a way of investing in mutual funds rather than a product. So, there is no way to get SIP And Mutual Fund differences and conclude which is better. Both are excellent in their rights. You need to choose which route of investing serves your need the best based on your financial goals.
- What are the drawbacks of SIP plans?
The following are some of the drawbacks of SIP Plans:
- In continually rising markets, returns on SIPs are lower.
- Dates for SIP are limited.
- With SIPs, you can only invest in pre-defined fixed amounts.
- There is a delay between the actual application and the SIP start/stop.
- SIP is not suitable for persons with volatile financial flows.
- Is SIP beneficial for investing in mutual funds?
SIPs or systematic investment plans protect you against risks such as short-term market volatility, emotional or impulsive responses, overspending, etc. SIP plans are among the easiest and most secure methods to participate in the Indian stock markets through numerous mutual fund options.
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