SIP vs Mutual Fund
Terms used : SIP - Systematic Investment Plan , STP - Systematic Transfer Plan
Sometimes you are confused about choosing the type of investment. The following article will help you give a comparison between SIP and Mutual Fund.
Both type of investment plans have their own merits and timing.
When the equity markets are bottomed up and are in a stage of rising up, lump sum investment could be better choice.
SIP/ STP is better only when the stock markets turn volatile because investors buy more units when markets drop and fewer units when markets rise. This helps to average the cost.
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Advantages of SIP over Mutual Fund
The major attraction of SIP is the split of investment funds. An investor can put his investments on monthly/ regular basis. Whereas in Mutual fund investment, the investor has to put a lump sum amount. SIP lowers the burden of investor, like a salaried employee, who can put a certain amount of his earnings into the equity market.
How much should you invest in SIP?
You do not have to invest a huge amount. Each fund has their own minimum amount. You could invest an amount as little as Rs 100 or Rs 500 depending on the fund. You will have to put the amount every month into the mutual fund scheme at the prevailing Net Asset Value (NAV) subject to the applicable load. The advantage of this system is to have a saving on regular basis and also to build up an investment.
SIP can be done once in a month or once in 6 months depending on the fund. You will have to pick a date provided by the fund for the SIP to be done and on that particular date chosen by you, the amount to be invested in the fund will be credited to your mutual fund.
Duration of Investment in SIP?
Investment through SIP can be done with a minimum of 2 years of time frame. However, you will have to mention the duration for which you want to invest in SIP. If at any time you would like to discontinue SIP, then you will have to inform 15 days prior to the payout. Your SIP will then be discontinued and the money can be withdrawn as and when you require.
In India SIP is offered by most of the famous Asset Management companies like :
SBI, ICICI, UTI, SUNDARAM HDFC Birla Kotak TATA Reliance etc.
Recommended Read :
- Methods to Select the Best Mutual Funds
- What are Mutual Funds?
- What is SIP (Systematic Investment Plan)?
- How Does a Sip Work?
- Types of Mutual Funds in India
- 5 Types of Popular Mutual Funds in India
- Understanding Mutual Funds Returns?
- Fixed Deposit Vs Mutual Fund
- Real Estate Vs Mutual Fund
- Mutual Fund Investment Strategy
- Mutual Funds in India
- What is Net Asset Value (NAV)?
- Open Ended Mutual Fund Scheme
SIP seems a better option for people who do not have access to huge sums. It is that form of investment suitable for the ones who have a fixed source of income like the salaried people. The best thing about SIP is that it nurtures the saving habit in people and also they do not have to pay very hefty amounts. You can check out the Asset Management Companies in India that offer SIP.
I agree that SIP is definitely a better alternative but Mutual funds too have their practicability in the modern times.However, a SYSTEM as in SIP usually does miracles on part of the investor as well as the provider but going on the notion that “Mutual funds are subject to market risks” is well behind time now.