SIP Vs Mutual Fund: Know Difference and Which Is Better

Discover how SIPs offer regular investment and mutual funds offer diversified portfolios.
SIP Vs Mutual Fund
3 mins
09 Feb 2024

A systematic investment plan (SIP) is a method of investing in mutual funds, where a fixed amount is invested at regular intervals. Mutual funds, on the other hand, are investment vehicles that pool money from many investors and invest it in a variety of assets, such as stocks, bonds, and money market instruments.

What is SIP?

Systematic Investment Plan (SIP) is a disciplined and hassle-free approach to investing in mutual funds. It involves regularly investing a fixed amount at predefined intervals, typically monthly or quarterly. Investors can start with a small amount and gradually increase it over time. SIPs offer the benefit of rupee cost averaging, as more units are bought when prices are low and fewer when prices are high. This strategy helps mitigate the impact of market volatility, making it an ideal option for long-term wealth creation.

What is Mutual Fund?

A mutual fund is a professionally managed investment vehicle that pools money from various investors to invest in a diversified portfolio of stocks, bonds, or other securities. Each investor in the fund owns shares, which represent a portion of the holdings of the fund. Mutual funds provide an opportunity for individuals to access a diversified and professionally managed investment portfolio, even with relatively small amounts of capital. They are overseen by fund managers, who make investment decisions based on the fund's objectives.

SIP In Mutual Funds – How They Work?

SIP in mutual funds involves making regular, periodic investments in a chosen mutual fund scheme. Investors can select the SIP amount, frequency and the mutual fund scheme based on their financial goals and risk tolerance. The SIP amount is deducted automatically from the investor's bank account and used to purchase units of the chosen mutual fund. Over time, the cumulative effect of regular investments, coupled with the power of compounding, can potentially yield significant returns. This approach encourages financial discipline and minimizes the impact of market volatility on the overall investment.

What is the difference between sip and mutual fund?

  • Mutual Funds: A Brief Overview
    A mutual fund is essentially a pool of funds collected from various investors. These funds are managed by professional fund managers who make investment decisions on behalf of the investors. The fund manager invests in a diversified portfolio of stocks, bonds, or other securities with the aim of generating returns for the investors. Mutual funds allow investors to invest in a variety of assets without directly owning them.
  • SIP: Understanding the Concept
    A Systematic Investment Plan (SIP) is an investment strategy that involves regular and consistent investments in mutual funds. Instead of investing a lump sum amount, investors contribute smaller fixed amounts at regular intervals, usually monthly or quarterly. This approach helps in mitigating the effects of market volatility through a process called rupee cost averaging. In simpler terms, investors buy more units when the prices are low and fewer units when the prices are high, which averages out the overall cost over time.



Mutual Fund

Investment approach

SIP involves investing a fixed amount at regular intervals. It is a disciplined approach that encourages regular savings and minimises the impact of market fluctuations.

Investors can choose to invest a lump sum amount or make periodic investments (like SIPs). The fund manager makes investment decisions based on the fund's objective and strategy.

Risk mitigation

SIPs help mitigate the risk of market timing, as investments are spread over time, reducing the impact of market volatility.

Risk can be low to high, depending on the type of mutual funds, investment frequency, market timing, etc.


Potential for higher returns over the long term.

Potential for higher returns over the long term, but also high risk.


Can be discontinued or changed at any time.

Can be difficult to sell or redeem units, especially in closed-ended funds.


SIPs offer the flexibility of investing smaller amounts at regular intervals, making it more accessible for investors with varying budgets.

Mutual fund investment may or may not be affordable in the case of SIP, lump sum investment

SIPs vs Mutual Funds: Where to invest

It is important to understand that SIP is the mode of investing a particulate amount of money in mutual funds over a period of time. On the other hand, a mutual fund is a type of investment where a group of investors pool their money together to buy a variety of assets, such as stocks, bonds, and money market instruments. The assets are managed by a professional investment manager, who aims to generate returns for the investors.

The best way to decide which investment option is right for you is to consider your financial goals, risk tolerance, and investment horizon. If you are looking for a disciplined and low-cost way to invest for the long term, then SIPs are a good option. However, you also have the option to invest a lump sum amount in mutual funds if you are confident about the market timing.

Factors to Consider Before Choosing Between SIP Vs Mutual Funds

  • Investment Horizon: The investment horizon, or the duration for which an investor intends to stay invested, is crucial in deciding between SIP (Systematic Investment Plan) and mutual funds. SIPs are suitable for long-term goals due to their systematic and regular investment approach, while mutual funds can cater to both short-term and long-term objectives.

  • Cost of Investment: Comparing the costs associated with SIPs and mutual funds is essential. SIPs often allow investors to start with smaller amounts at regular intervals, making them more cost-effective for those with limited funds. On the other hand, mutual funds may have higher initial investment requirements, impacting the affordability for some investors.

  • Risk Analysis: Risk tolerance is a key factor in choosing between SIPs and mutual funds. SIPs, with their disciplined and phased investment approach, provide a more risk-mitigated strategy. Mutual funds, depending on their type, may involve varying levels of risk. Assessing one's risk appetite and aligning it with the chosen investment option is crucial.

  • Details of the Fund House: Understanding the reputation, track record, and credibility of the fund house offering SIP or mutual funds is vital. A reputable fund house is likely to adhere to ethical practices, have experienced fund managers, and provide transparent and reliable services to investors.

  • Past Performance: Evaluating the historical performance of SIPs and mutual funds is essential for informed decision-making. Past performance can offer insights into the consistency and reliability of returns, helping investors gauge the potential of the chosen investment avenue. However, it's important to note that past performance is not a guarantee of future results.

Here are some of the benefits of investing in Mutual Funds through the Bajaj Finserv Mutual Funds Platform

  • No hidden charges: You can start investing in mutual funds with a 0% commission. The charges associated with the funds (exit load, taxation, expense ratio) is also clearly called out in the fund pages.
  • Diversification: Bajaj Finserv Platform has 1200+ mutual funds options to invest in. You can choose and compare funds that suits your financial goal.
  • Smart Tools: Bajaj Finserv Mutual Funds investment platform offers smart tools like the SIP Calculator for investors to check the estimated return and the future value of their investments.
  • Convenience: Bajaj Finserv Platform is a secure and easy-to-use platform. It is end-to-end online so you can invest and manage your investments at your leisure.
  • Flexibility: You can invest in any mutual funds according to your continence, or you can even start an SIP.


Both SIP and mutual funds offer unique benefits and cater to different investment styles. Understanding your financial objectives and risk appetite is essential in making the right choice. With Bajaj Finserv's online trading platform, you can embark on your investment journey with confidence, backed by a platform designed to support your investment needs.

Calculate your expected investment returns with the help of our investment calculators

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Frequently Asked Questions

Is a mutual fund the same as SIP?

No, a mutual fund is a financial instrument that pools money from investors, while SIP (Systematic Investment Plan) is a method of investing in mutual funds regularly through fixed contributions.

Is SIP safer than a mutual fund?

SIP is not inherently safer than a mutual fund; it's a strategy for investing in mutual funds

Which is better for the long term: SIP or Mutual Funds?

SIPs in mutual funds are a popular choice for long-term wealth creation, as they enable disciplined investing and benefit from compounding.

How do I know which SIP is better for me?

Choose a SIP based on your financial goals, risk tolerance, and investment horizon, or consult a financial advisor for personalized guidance.

For higher profits, which is better: mutual funds or SIP?

Mutual funds and SIPs are different investment vehicles. Mutual funds include various investment options, while SIP is a method to invest in mutual funds systematically over time. Both can offer opportunities for profit, depending on market conditions and investment strategies.

Can I withdraw SIP anytime?

Yes, SIP investments can be withdrawn at any time. However, the redemption process may take some time, and there could be exit loads or penalties depending on the mutual fund scheme's terms and conditions.

Is SIP tax-free?

SIP investments are not inherently tax-free. Returns from SIP investments are subject to taxation based on the type of mutual fund and the holding period. Equity mutual funds enjoy tax benefits after one year, while debt funds have different tax implications.

Which SIP gives the highest return?

SIP returns vary depending on market performance, fund selection, investment horizon, and risk appetite. There is no guarantee of the highest returns, but historically, equity-oriented SIPs have the potential for higher returns over the long term compared to debt or hybrid SIPs.

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