Mutual Funds and SIPs are amongst the preferred investment options for anyone looking at diversifying their portfolio or aiming at wealth creation. Are mutual funds and SIP the same, or are they different? What is a better investment option?
Mutual Fund and SIP Explained
A mutual fund (MF) is a financial instrument that pools your and other investors’ money. The pooled corpus is invested, as per a common objective. When you buy any mutual fund units, you get proportionate ownership of the assets where the fund has made investments.
A Systematic Investment Plan (SIP) is not a different investment instrument; it is investing in an MF. When you invest in a mutual fund, you could either invest a lump sum or invest through a Systematic Investment Plan. When you invest a lump sum, then you make a single chunk of investment in one go. Through the SIP route, a fixed amount is invested regularly at predefined intervals.
The SIP option allows you to make monthly, quarterly on yearly investments in a mutual fund. Use a sip return calculator and a mutual fund calculator to calculate the returns in the fund of your choice.
Difference between Mutual Funds and SIP
| Systematic Investment Plan | Mutual Fund (Lump sum) |
| Regular investments are made, which encourages the habit of saving. | Investment is made in one large sum. If you have spare funds, then it is a good idea to invest them in one go. |
| Offer you flexibility as you can invest small amounts too. | Investment is made once depending on the availability of funds. |
| Units are bought over a period which reduces volatility risk; few of the investments will be made when the market is volatile. | With the lump-sum investment, a lot depends on the timing. The investor is always confused about the timing. |
| As you increase your investment by a fixed amount you earn returns on returns. This is known as the power of compounding. | You can choose to reinvest the earnings instead of withdrawing them and earn returns on returns and enjoy the power of compounding. |
Which SIP or Mutual Fund to Choose?
Your decision to invest in a mutual fund through the SIP option will depend on various factors like your financial goals, your risk appetite and income and expenditures. You can use the SIP Calculator to calculate how much your investment will earn over a period and then plan as per your financial goals.
Below we list a few options to invest in through the SIP route;
| Fund Name | Type | Annualised Returns |
| Quant Active Fund | Equity Multicap | 21.45% |
| Mirae Asset Emerging Bluechip Fund | Equity Large & Mid Cap | 20.52% |
| UTI Equity Fund | Equity Multi-Cap | 20.13% |
| Axis Bluechip Fund | Equity Large Cap | 19.48% |
| Canara Robeco Bluechip Equity Fund | Equity Large Cap | 19.33% |
| DSP Equity Fund | Equity Multi-Cap | 17.09% |
Conclusion
When you invest in mutual funds, you can benefit from professional management and create wealth with minimal risk. The sooner you start investing in mutual funds, either through an SIP or a lump sum, the better it is for wealth creation. Mutual fund sip calculators will help you estimate the corpus that will accumulate if you start investing now.
