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What is the difference between SIP and Mutual Fund?

What is SIP?
A person can invest a small amount in a Mutual Fund at regular intervals (monthly/quarterly) through SIP also known as Systematic Investment Plan.
SIP averages your investment cost over the investment duration and gives the flexibility of choosing your own amount and frequency, making it an ideal investment option for any investor.
How does it work?
• Every month/quarter a specific amount (decided by the investor at the start of SIP) is deducted from the investor’s bank account and invested in the chosen mutual fund scheme.
• Every time the amount is invested, units of the scheme (as per NAV) are allotted to the investor.
• Since your investment amount gets broken down in equal installments, your investments average out the market ups and downs resulting in averaging your cost.
• An investor can redeem (withdraw) units or switch out to another scheme anytime, he/she wishes to do so. (Please check the scheme related documents as some mutual funds would have a specified lock-in period.)
What is a mutual fund?
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature.
Mutual funds have advantages and disadvantages compared to direct investing in individual securities. Providing economies of scale is the primary advantage of mutual funds, a higher level of diversification, they provide liquidity and they are managed by professional investors. On the negative side, investors in a mutual fund must pay various fees and expenses.
Primary structures of mutual funds include open-end funds, unit investment trusts, and closed-end funds. Exchange-traded funds (ETFs) are open-end funds or unit investment trusts that trade on an exchange. Mutual Funds are also classified by their principal investments as money market funds, bond or fixed income funds, stock or equity funds, hybrid funds or other. Funds may also be categorized as index funds, which are passively managed funds that match the performance of an index or actively managed funds. Hedge funds are not Mutual Funds; hedge funds cannot be sold to the general public and are subject to different government regulations.
Me being an expert in this field as well as an experienced investor, I would highly recommend HDFC securities as they are the best in this business. If you’d like to invest in SIP or mutual funds you should click on the link below:


  • With the help of SIPs, you are investing in mutual funds. In other words, SIP is a tool by which you can invest in mutual funds. SIP is a method of mutual fund investment and not a type or comparable investment instrument. The other tool for investing in a mutual fund is a lump sum amount or one-time investment.

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