The Difference Between Mutual Fund And Systematic Investment Plan (SIP)

Many individuals get the terms Systematic Investment Plan (SIP) and Mutual Funds mixed up. Mutual Funds are an investment product, and SIP is one technique for investing in Mutual Funds. So, when you invest via SIP, you are investing in a Mutual Fund. To get a clear approach for both you can take assistance from some of the best stock tips provider firms.



Let's take a closer look at the differences between mutual funds and SIPs. And how SIP may help you invest in Mutual Funds more efficiently.
   

Difference Between Mutual Fund And SIP

 
A mutual fund is an investment strategy that is professionally managed. An asset management firm (AMC) runs the program, which pools money from several individuals like you to invest in stocks, bonds, gold, and other securities. Mutual Fund plans, then, are a type of financial instrument that attempts to increase your money.
 
SIP, on the other hand, is only an investing strategy. SIP allows you to invest a certain amount of money at predetermined periods.
 
Surprisingly, the SIP investment approach may be used for Mutual Funds, your public provident fund, term deposits, and even purchasing a 2-gram gold coin every month. It implies investing a specified amount of money in a specific asset class at regular periods.
 
Nonetheless, SIP remains one of the most popular strategies to invest in Mutual Funds. To have a better understanding, let us look at how SIPs function.
 
How Do SIPs in Mutual Funds Work?
 
When beginning an investment using a Systematic Investment Plan, four decisions must be made:
 
● You wish to invest in a Mutual Fund program.
 
● The sum you wish to invest
 
● The regularity of payments, such as weekly, monthly, quarterly, and so on.
 
● Finally, the date on which the funds will be debited from your bank account.
 
You may begin your SIP once you have clarity on these four points.
 
Assume you wish to invest Rs. 10,000 in the Nippon India Growth Fund, a mid-cap fund, on the first business day of each month.
 
On the first working day of each month, a sum of Rs. 10,000 will be deducted from the bank account. You will be assigned units in the Nippon India Growth Fund at the current NAV (value of each Mutual Fund unit) on that day. And the process will continue until you cancel or set an end date for your Systematic Investment Plan.
 
The number of units assigned is determined by the scheme's NAV on that day. As a result, if the scheme's NAV rises, you will receive fewer units. And if the scheme's NAV falls, you will receive more units.
 
You continue to amass units over time. When there is a sharp correction, the number of units increases, and when there is a fast rebound, the number of units decreases. This strategy of obtaining fewer and more units helps to average the cost of acquiring Mutual Fund units throughout the SIP. In reality, the disciplined practice of investing via SIP is one of the finest wealth-building strategies available to average investors, and here's why.
 
Conclusion
 
SIPs frequently correspond to our income cycle, and a portion of our monthly wage can be invested. Because SIPs are automated, they are the ideal antidote to the problem of individuals investing when markets are high and withdrawing money when markets are down.
 
Furthermore, SIPs are adaptable since they allow for tiny accumulations and provide compounding benefits. Finally, the averaging feature eliminates the need to worry about when to join and quit the market, which is a huge benefit for any frequent investor. If you take assistance from the best stock tips provider in India, they could help you get a clear understanding of both.
     

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