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SIP vs Mutual Fund – Meaning & Difference

SIP vs Mutual Fund

Many investors consider mutual fund investments as a simple and convenient way to invest in stocks. Mutual funds are managed and operated by professional professionals in the form of fund managers. Before investing in stocks, they conduct extensive study and analysis of companies, their fundamentals, stock price movement tendencies, and future possibilities. The fund managers choose the best investment option based on the findings.

An investor has no need to be concerned about their money being invested in the stock market via mutual funds. Research staff and a fund management team support their investments.

The risk of market movement is reduced because the money is invested in diverse assets for different investment horizons. When the risk is decreased, a loss in one asset is offset by a profit in another item in the portfolio.

An investor may not have the time or skill to follow and comprehend stock market action. This is where fund managers come in; they make the right judgement at the right moment.

Now that we’ve shown the benefits of investing in mutual funds, let’s look at the differences between SIP and lump-sum mutual fund investments.

What is a Mutual Fund?

A mutual fund is a collection of money collected from investors with the goal of investing to achieve a shared goal. To earn returns while meeting the specified goal, investments can be made in a variety of assets such as stocks, bonds, and money market instruments.

It is professionally managed by an asset management firm (AMC), and each investor contributes in proportion to the number of units held.

A mutual fund is a form of investment instrument that invests in a portfolio of stocks, bonds, and other securities or a mix of the two.

Mutual funds can provide investors with low-cost access to diverse, professionally managed portfolios. These are classified according to the kind of securities they invest in, their investment objectives, and the type of returns they provide.

They collect annual fees (known as expense ratios) and other expenses in exchange for managing the fund on behalf of investors.

What is a SIP?

A methodical investment strategy SIPs are a method of investing in mutual funds. It is just a method of contributing little but regular sums to a mutual fund in order to establish a good corpus over time.

It encourages investors to invest a set amount on a regular basis, such as weekly, monthly, or quarterly. SIP allows an investor to invest in instalments while keeping his or her monthly income and spending on track.

It is critical to begin investing, even in little amounts.

What is a lump sum investment?

Now that we’ve defined SIP, let’s look at lump sum investments in mutual funds.

SIP and lumpsum investments are basically two methods of investing in mutual funds. SIP investments invest a specified amount at regular intervals, whereas lump sum investments are invested all at once.

Depending on the financial strategy, investing goals, and time horizon, an investor with considerable cash on hand may choose to invest in a lump sum mutual fund. An investor with recurring income, on the other hand, can choose to invest in SIPs.

When you invest in a mutual fund with a lump sum, you get to buy all of the units in a single transaction. Let’s take an example, if you want to invest Rs. 24,000 in a mutual fund scheme, you would make a single payment to finish the investment amount plan.

The identical investment amount of Rs. 24,000 is spread across 12 months in the case of SIP, where you have the opportunity to purchase units by investing Rs. 2000 per month.

According to the preceding statement, SIP is not a product, type of investment choice, or instrument in and of itself. It is just a method of contributing little but regular sums to a mutual fund in order to establish a good corpus over time.

If you have a long-term investment goal, SIP is usually considered a solid technique.

You can start your SIP/Mutual fund journey Here.

Difference between Mutual Fund and SIP

1. Mode of Investment

When you use SIP as a manner of investment, you make regular payments to purchase mutual fund units. This instils the habit of investing on a regular basis.

2. Compounding Power in SIP Investments

A SIP investor makes disciplined investments on a regular basis, building wealth over time. SIP can be thought of as a more effective way to meet the financial plan’s and investments’ objectives.

An investor who uses mutual funds has the choice of reinvested returns or earnings. Investors can benefit from the power of compounding if they reinvest in the same plan rather than withdrawing their money.

3. Lower Cost

You can benefit from cost averaging if you invest in SIPs. This means that you can reduce your overall purchase cost by purchasing more units when the market is down and fewer units when the market is up. This allows you to lower your average purchase cost.

In contrast, if you invest in a lump payment, you will end up purchasing all of the units at a higher price because you will not profit from averaging.

4. Volatility

Investors, particularly novice ones, are frequently perplexed about the ideal timing to enter the market. When investing in a lump sum, there is always the issue of timing the purchase and thus being exposed to high volatility times.

With a SIP, the purchase is spaced out over time, and only a portion of your total investment will be subject to higher-than-usual market volatility.

5. Flexibility

You have more flexibility with SIP investing because you can invest little sums on a regular basis, perhaps weekly, fortnightly, or monthly, as you see fit. As a result, SIP is suitable for salaried individuals or those with consistent cash flows.

SIPs allow you to invest in mutual funds without disrupting your current lifestyle or spending habits. When you have a large sum of money to invest in a mutual fund plan, you can do so.

SIP Vs Mutual Fund

SIPLump-sum Mutual Funds
VolatilityLess impactMore impact
CostLess because of rupee cost averagingBecause the investment is made in a single transaction, it is high.
Investment wayRegular One Time


We hope this has clarified the distinctions between SIP and mutual fund investing. And you will now be able to compare SIP vs mutual funds.

SIPs provide flexibility, cheaper costs through averaging, and an efficient solution to handle volatility. It’s simply a more prudent method to invest.


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