In this article we will give you the difference between SIP and mutual fund. Let’s explore SIP vs Mutual Fund. First of all, here we briefly define the explanation of both terms.
Mutual Funds refer to those funds which invest your money in a proper way. Mutual Funds provide guidance to investors to judge which fund would be beneficial and which funds are worth taking a risk. Mutual Funds bring money from many people and invest in their stocks, bonds and other assets.
SIP is an abbreviation of Systematic Investment Plan (SIP). This plan is implemented for those investors, who want to get an additional income in future. Various mutual fund agencies are facilitating this plan to their customers. In this plan, investors are required to invest a pre-mentioned amount on a weekly, monthly or yearly basis.
After maturity of plan, investors will get their money including a sum of return. It is a fabulous option for those investors who does not wants to carry a risk factor in their investment. Here, we can deposit their funds for specific investments and can purchase shares by investors at different prices and then pay an amount according to overall share price. This concept is also known as Dollar Cost Averaging.
In this article, we are trying to mention few differences between both major terms. These terms are strongly correlated with each other. As we mentioned earlier, Mutual Fund has provided various plans and, in their plans, the SIP is also included. SIP is one of the best plans, which is proving benefit for low budget investors.
Mutual fund has provided various opportunities to their investors. However, most of the plans are requiring more amount to invest. Therefore, mutual fund agencies have decided to implement a plan for only lower amount investors, which we call as Systematic Investment Plan (SIP). SIP is also proven beneficial for those investors who have just started earning and want to invest early.
On the other hand, SIP is also creating a problem for investors. In a period where markets are down, it is mandatory for investors to invest a specific amount every month. It feels and sounds like a big problem because during this period, individuals have need for more money in order to fulfill their expenses. Therefore, they don’t want to invest or pay in any investment policy. However, they have to pay the amount, in the plan of SIP.
However, we are not trying to say that this plan is totally useless for investors. It has many advantages, which are acquired by choosing this option.