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People often consider Mutual Funds and SIPs to be the same. However, there are fundamental differences between the two which are quite unknown to first time investors.
Below are few differences which will shed light on the same.
Mutual Funds: Mutual funds are instruments for investment. Here, the savings of various investors are pooled to invest in shares, money market securities, etc. In simple words, mutual funds further invest your money in:
• Equity, Debt or Hybrid Instruments (mix of both equity and debt fund)
Other major categories include Index Funds, Liquid Funds, Gilt Edged funds, etc.
On the other hand, SIP, i.e. Systematic investment plan, is a method of investing in mutual funds. It is a process through which you can contribute small but regular amounts to a fund of your choice, in order to build a good corpus. Having a long term goal is considered a good practice while investing in Mutual Fund.
SIPs are considered to be the most effective means of investment since they allow you to invest in mutual funds for the future, without disturbing your present lifestyle and expenditure pattern. You can invest small amounts on a regular basis either weekly, fortnightly or monthly, as per your convenience.
If you’re someone who has set financial goals and looking for a hassle-free and paperless Mutual Funds, I recommend HDFC securities’ Digify. It’s easy to invest, track and withdraw anytime.