How SIP Investment is Different from Mutual Fund - CRED
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how sip investment is different from mutual fund?

how sip investment is different from mutual fund?

systematic investment plan (sip) simplifies investment by offering substantial flexibility, whereas, mutual fund offer investors to invest in stocks.
finance
March 30, 2021
7 min read
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how sip investment is different from mutual fund

How SIP Investment is Different from Mutual Fund

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mutual funds offer investors an easy and comfortable way of investing in stocks. since this investment is backed by a fund management team across a diverse asset portfolio, it provides a low-risk investment with higher returns than other investment alternatives. systematic investment plan (sip) further simplifies this investment by offering substantial flexibility.

how is sip different from mutual funds?

while mutual fund is an investment instrument, sip is a tool to invest in mutual funds. another tool to invest in mutual fund is the lump sum mode, where you need to make a single payment.

following are some key differentiators which explain how sip enables convenience and flexibility with a long-term investment goal.

mode of investment

unlike lump sum mutual funds, sip enables you to invest with a predetermined payment at regular intervals. you can invest with as low as ₹100. it’s best for people with steady cash flows and inculcates the habit of consistent investment.

flexibility

sip offers unmatched flexibility. you can invest weekly, bi-monthly, monthly, or quarterly. during a financial crunch, you can pause the sip at no additional cost and resume it once you gain financial stability. what more! if you are convinced with your sip benefits, you can decide and invest more. alternatively, for some reason, you want to discontinue investing in sip, you can even exit it.

cost aspect

sip enables you to benefit from cost averaging. you can buy fewer units when the market is up and more units when the market is down. it helps you lower the overall cost of purchasing. on the other hand, the lump sum mode doesn’t offer you this benefit, as you need to purchase all the units at a price that can be higher than the average.

volatility

stock markets are unpredictable, and if you are not a seasoned investor who is well aware of the best time to enter the market, you may expose yourself to this volatility. sip reduces this risk by spreading your purchases over time. this way, only some parts of your entire investment may face higher than average market volatility.

power of compounding in sip

with a disciplined investment at regular intervals, sip helps an investor accumulate wealth over a period of time and offers a better way to achieve the investment goals and financial plan. you can either withdraw the earnings or reinvest them in the same plan. by reinvesting, you can reap the benefits of the power of compounding.

how sip calculator can help you invest in sip efficiently

sip offers flexibility, ease, affordability, and convenience with financial gain. you can maximize your sip returns with careful calculations and estimations.

a sip calculator from cred can help you make the right sip investment decision by managing complex calculations. all you have to do is access the mutual fund sip calculator at a single click from any corner of the globe, key in the values, and it will calculate the invested amount with estimated returns for you. further, the sip return calculator will help you select a suitable mutual fund scheme to reap maximum benefits from your investment.