SIP and mutual funds are the parts of investment. Many people have on this topic that, is SIP and Mutual funds are same or not ? A mutual fund is an investment product or instrument, while an SIP is a method of investing in mutual funds. So, let me clarify this with a definition and an example. Read the complete article.

Everywhere, people find the right way to invest their money for a good return, but lots of people don’t understand the right way to invest their money, how to invest, or where to invest. In India, there are so many ways to invest money, but the majority of people don’t know which investment is better for them or which investment can give them a good return.

There are so many ways to invest your money for example: Stocks, FD, Gold, Real Estates, Bond, Saving scheme, Lumb sumb investment, SIP, Mutual fund etc.

Many people start their investing on the stock market, and they also trade. People hold their investments for the long term or short term, according to the market or analysis. Most investors want to increase their investment without checking or tracking their portfolio or trading in the stock market. Even many big investors or middle investors hire fund managers or stock market investors who can invest their money and give them a good return. It also saves investors time. Stock market analysts have good, even very good, experience in the stock market, which can help investors invest their money or get good returns in the short  and long term. Moreover, the fund manager’s and stock market analyst’s professional knowledge will be beneficial in maximizing the profit from the investment.

Finance companies like LIC, HDFC Bank, ICICI Bank, State Bank of India, Axis Bank, or other banking or investing schemes that agents provide you, all investment planning is not good for the people. But the majority of people in India don’t know the right way of investing, so they just invest in this type of scheme and get some return. But SIPs, or mutual funds, are better than this type of investment.

Both investment SIP and Mutual fund are the part of investment on share market. There is not that much difference between them, but there are a few differences. In this article, we completely discuss the difference between an SIP and a mutual fund and how they actually work, with examples.

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What is Mutual Fund ?

Mutual funds are investment plans where mutual funds collect money from investors and invest their money in stocks and bonds. Mutual fund houses use all the money to buy stocks, bonds, and securities to grow investors money. They trade all investors money and get  a profit. Mutual fund companies trade on their behalf to maximize profit ratios and with the lowest risk.

In a simple word, a mutual fund house collects money from all the investors, and they invest their money or buy stocks or bonds. After a year or long-term investment, they get profit, and the company provides profit to the investors. And this is how investors get profits from mutual funds. Mutual funds are the best way to invest, and this is the safest way to invest money.

Mutual funds are the safest way to invest money from multiple investors to buy stocks, bonds, or other assets. These funds come in different types, such as small, mid, or large-sized companies, mirroring a specific market index, and so on.

Any kind of mutual fund scheme is operated by a fund manager and fund manager appointed by AMG (Affiliate Manager Group). There are two types of ways to invest in a mutual fund: 1. lump sum; and 2. SIP (systematic investment planning). 

Mutual depends on the stock market. If you can’t invest by yourself in the stock market or trade with your risk, then a mutual fund is the best way to invest money with almost no risk.

What is SIP ?

The definition or meaning of SIP is systematic investment planning. People should invest their money in a systematic way every month. Let me clarify this:

Systematic Investment Planning (SIP) is the way to invest money in a systematic way. Anyone can invest any fixed amount, or they can increase the amount and invest every month on the same date.

For example, you can start an investment of $5,000 every month at the same date, and if you want to increase your investment, you can invest your money. Most people do SIP for the long term because it gives a higher return in the long term, and this investment method works on compounding.

SIP is the safest or best way of investing. It provides you with almost zero risk; you just have to choose the best SIP plan, and you can start your investment with almost zero risk.

Difference between SIP & Mutual Fund:

Mutual fund and SIP are not different. Many people have doubts about the difference between mutual funds and SIPs. They think about where to invest mutual funds or SIPs. But SIP is the way to invest money through a mutual fund.

SIP means systematic investment planning, where we can invest money in a systematic way in any stock or mutual fund. This is the way to invest money on a monthly or weekly basis, according to the date. This is the right way to invest money in a mutual fund if we want very low risk. The money every year increases, and compounding work is being done on this. No matter what the market is doing, if the market is bullish, we can invest, and if the market is bearish, we can still invest.and if the market is bearish, we can still invest. It doesn’t harm our investment.

Even mutual funds have two ways to invest your money: one is lump sum, and the second is SIP.

In Lump sum you can invest big amount for a time. For example, you invest Rs. 2 lakh in a single time. If you choose the right stocks or mutual fund to invest your money in, then this investment can give you the best result. So, if you do lump-sum investments, then invest your money after analysis.

And if you do SIP, then you can invest in a systematic way that provides you with very low risk if you choose the right stock or mutual fund.

Majority of the people tells you that SIP is much better then Lump Sum. It is Technically incorrect.

Let me tell you in example:

Mayank is Making an Investment of 5 Lakh in Lump sum of 5 Years expecting an average Return of 8% during the Rising Market.

Even his friend kaushal didn’t invest Lump sum amount, however he started investing in SIP mode. 1 Lakh / Year for Next 5 Years. He got 9% return.

At the end of 5 Years, Mayank had 7.35 Lakhs with him. While Kaushal had 5.98 Lakhs.

Yes, Even though Mayank had got 1% less return he ended with more than 20% of Kaushal’s Amount.

But for long-term vision, sometimes SIP can give you the best return, or Lump Sum can give you the best return. So, before investing, you just have to analyze the market. If you want a lump-sum investment, you can choose the right index, stock, or mutual fund to invest in, or if you want to invest in an SIP, you can choose the right SIP with a good % ratio.

(Conclusion: Mutual funds and SIPs are both investment planning. SIP is done by a mutual fund, while a mutual fund is the product of an investment. Both are not different; they are just attached to each other. In a mutual fund, you can invest using an SIP or lump sum.)