Difference Between SIP and Mutual Funds (Complete Overview)

For the investors who love to invest their hard-earned money to the markets and stocks, but do not want to invest a large amount to that, the SIP and the mutual funds are the most popular and most opted for options. These two are a better option than investing directly to the shares and if you are not aware the market’s behavior and want to invest your money at a safer place, the SIP and mutual funds can be the savior for you. And if you are confused that which of these two would be a better option for you then read further to know more about the SIPs and mutual funds, how they are classified, and what are the major difference between these two modes of investment. By choosing one of them, you can easily invest your money in the right way.

By the end of the article, you shall be able to distinguish between these two and you can also suggest the people the best mode of investment for them according to their financial goals and status.

SIP and Mutual Funds


  • Definition

SIP or Systematic Investment plan is actually a method to invest in the mutual funds. The Sip enables you to invest a pre-determined amount at the regular interval of time. You can choose as less amount as INR 500 per month and start your investment in shares and stocks. This makes SIP  a great way to invest and get good returns for those users who do not have lump-sum amount to invest in the market.

  • Type of investment

SIP is a periodic investment that the users can easily invest in. The SIP lets the investors invest a small amount of money in small intervals that can be great for the long-term investment. The is great for those investors who were looking to invest a good amount to the mutual funds, but do not have enough money at the moment. BY choosing the SIP as your investment mode, you can invest a small amount at regular time intervals and the get almost similar returns as investing the lump-sum money to the mutual funds at once.

  • Risk Factor

When it comes to the risk, the SIP can be treated as same as the mutual funds as the money is actually invested in bonds and stocks like the mutual funds. The only benefit is that you won’t have to invest a lump-sum amount. So, whether you are looking for a long-term risk-free investment, or are looking forward to invest in a place where they can gradually add money to get a good amount after few years, the SIP can be a great choice for you.

  • Returns

When it comes to the returns, the SIP and the mutual funds are almost similar. The reason behind this similarity is that through the SIP, you eventually invest your money to the mutual funds. So, if you are choosing one of them on the basis of the returns, both of them are same.

Mutual Funds

Mutual funds are for those investors who are not aware of the way the market behaves on various factors. BY investing in the mutual funds, you can be free from the tension of finding the best stocks and bonds without worrying about their past performance and current reputation. These all will be perfectly taken care of by the investment company through which you have bought the mutual funds.

In India, mutual fund is basically a pool of money that is managed by an investment company and then invested as a lump-sum in stock, bonds, or to the mixture of both according to the returns expected. Furthermore, the profit and loss is divided equally as per the amount invested by an individual investor. So, you can be assured of getting good returns (or at least comparatively lesser loss). So, if you are looking for a long terms investment, then try mutual funds, as they are better for the long-term goals.

Although the market risk is still there while investing money in the mutual funds, but as the money is invested in a large amount clubbed by numerous similar investors, the loss somehow looks lesser than investing in shares. Also, the investment company carefully examines the shares and the make it a diversified investment, that means your money won’t be invested in a single stock or bond. This makes it a perfect way to deal with the losses that the market usually suffers.

Major differences between SIP and mutual funds

  • SIP can be treated as a tool to invest money in the mutual However, mutual funds are the pool of money, which is collectively invested in the stacks and bonds.
  • SIP is a good way to invest for those users who want to start investing their money but are afraid of facing big losses. During the SIP investment, you can start investing with the least amount as 500, and on the other hand, if you invest your money directly to the mutual funds then you should invest a good amount at once to get the returns as per your expectations.

In all, if you are willing to invest your money in the market, and want to start slow, then the SIP would be a great option for you. And if you are looking for a long-term investment goal, and want to keep your money safe with decent ROI, then the mutual funds will be a better choice for you.

SIP and mutual funds two are the two clever ways to invest money to the stocks and bonds under the supervision of the professionals. The investment company makes a good of your money and ensures that you get the best returns. As both of SIP and mutual funds are intended to invest money to the bonds and shares, you can choose any of them according to your investment preferences and financial conditions. So, choose the best according and let your money earn more money for you.