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SIP Vs Mutual Funds

Updated On Aug 04, 2021

Nowadays, with the introduction of various apps, and new investment avenues, investing in the stock market has become relatively easier. In fact, people do not need to be experienced in this field and so even if you are having little knowledge, that is enough, as there are professionals, who advise you to make better investment decisions and also perform research on your behalf.

A Systematic Investment Plan (SIP) is a route to invest in mutual funds that brings discipline to your investment by investing a specified sum, at regular intervals. Systematic Investment Plan or SIP is a technique for making investments in mutual funds. It is a method that allows an investor to invest in small but regular amounts, in a mutual fund so as to accumulate wealth over time

Mutual Fund, as the name signifies, is a shared investment avenue, wherein the investors get proportionate ownership in the diversified pool of assets, based on the number of units held by the particular investor, as per the ongoing market rate. Due to the pooling of funds of various investors, there is a benefit of professional portfolio management, by a fund manager.

Advantages of Investing via SIP

SIP has several advantages that are discussed here:advantages-of-SIP

  • Rupee Cost Averaging

It provides the benefit of Rupee Cost Averaging, as the investment continues regardless of the upward or downward trend in the market, and so it averages out the cost of investment.

  • Power of Compounding

By investing in mutual funds through SIP, an investor gets returns on the returns, by way of compounding, which ultimately increases the overall value of the investment.

  • Disciplined Approach

SIP adds discipline to your investments by maintaining consistency in investments. This helps in building wealth over time.

  • No Need To Time The Market

In a systematic investment plan, an investor gets more units, if the price is low whereas if the price is high more units are received. In this way, the average cost remains at a lower level, which makes it irrelevant to time the market.

  • Long-term

As you invest small amounts via SIP and so one can start investments at an early stage and grow gradually. In this way, the investments spend more time in the market and grow over time.

Advantages of Investing in Mutual Funds

There are a number of advantages of investing in mutual funds which are disclosed below:advantages-of-mutual-funds

  • Professionally Managed

Mutual funds are managed by a team of professionally qualified and experienced fund managers. The team makes buying decisions on the basis of continuous research and analysis.

  • Diversification

In mutual funds, the portfolio is diversified and so the investment is not made in a single company, industry, or sector, which prevents you from market volatility.

  • Highly Regulated

Mutual Funds are regulated by the Securities and Exchange Board of India (SEBI), as per stipulated provisions, that protects the rights and interest of the investor.

  • Higher Returns

In the long run, mutual funds give higher returns to the investors, compared to other investment products.

  • Convenience and Flexibility

Mutual Funds provide a number of convenient features like liquidity, exchange privilege, and automatic investment plans. These are liquid as the investment is made in liquid assets which can be sold and repurchased easily. Also, within a fund company switching to another fund is allowed without any extra sales charge.

With the changing market scenario, the price of some securities may go up while the price of others may go down, and as you make regular investments in mutual funds, some shares are bought at a high price while some at a low price, which averages out the cost.


Investing in mutual funds, irrespective of the method, tends to give high returns in the long run, when the investment is done systematically. Mutual Fund implies a combined savings and investment tool, in which savings of a large group of small savers are put together and invested in a basket of securities for the mutual benefit of all and there is a proportionate distribution of returns. On the contrary, Systematic Investment Plan (SIP) is a route to invest a fixed amount in any mutual funds scheme opted by you, at a regular frequency.

Also read 

Mutual Funds vs. Money Back Plans

Child Plans or Mutual Funds, Which is Better?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.        

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