What is SIP?

SIP, short for Systematic Investment Plan, is a mode of investment in mutual fund schemes. As mentioned, funds come with two modes of investment. In the lumpsum mode, you can save up a sizable amount and invest it. However, in SIP, you make regular investments in a particular fund.


These may be monthly, quarterly, or of other durations as specified in the scheme you choose. SIP is often considered an affordable and comfortable way to invest as you need not strain your finances.

What are Mutual Funds?

Managed by fund managers, mutual funds pool your investment with that of other investors. The fund manager then invests the accumulated corpus into instruments that align with the fund’s primary objective.


Mutual funds help in diversifying your portfolio and lower the risk. This is because the investment happens on a smaller scale and in multiple asset classes, sectors, and more.

Difference Between SIP and Mutual Fund

In simple terms, the difference between SIP and mutual funds is that a mutual fund is a type of investment. In contrast, SIP is one of the ways of investing in mutual funds. 


To explain this further, consider these pointers. 

  • Mode of Investment

SIPs are a mode of investment. Here, you make systematic, fixed, and recurring payments monthly or quarterly to purchase units of mutual funds.



On the other hand, mutual funds are an investment vehicle, which you can invest in via lump sum payments or systematic plans. 

  • Investment Value

Depending on the mutual fund, the minimum investment value varies, as you can invest via several modes.


Conversely, for SIPs, you make smaller recurring payments monthly or quarterly. You can start investing with budget-friendly instalments, starting from ₹100.

  • Volatility

The stock market is constantly fluctuating, which causes it to go into bearish or bullish cycles from time to time. These changing market trends have a greater impact on mutual funds since the investment value is higher in mutual funds.


On the other hand, when you opt for an SIP, the impact of market volatility is comparatively lower. This is because SIPs allow you to benefit from rupee cost averaging during volatile periods. Simply put, it helps you average out the cost of units during such periods.  

  • Flexibility

SIP offers greater flexibility since you can invest freely at a frequency that works for you. Additionally, you can start your investment with a smaller investment amount, providing accessibility at all levels. 


Mutual funds are also known for their flexibility, as you can invest in them in more than one way. While lumpsum investments are common, there are several systematic modes that you opt for as well. Among these are SIP, SWPs and others.  

  • Associated Charges

Like every investment, there are some fees and charges associated when you invest in mutual funds These include the annual maintenance charges, fund manager’s fees, transaction costs, and other charges. 


On the other hand, the SIP mode of investing has few specific charges associated with it. Some common examples are the SIP bounce charge and SIP withdrawal charges.

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SIP vs Lump Sum

Comparing the benefits of SIP vs. lumpsum can help you choose the right investment mode.


However, the answer depends on your current finances and goals. If you have the capacity to make a substantial one-time investment, you can go for a lump sum. If not, opt for SIP.


A SIP usually offers more flexibility as the minimum investment is comparatively lower than the lumpsum mode. Also, remember that a SIP offers higher gains if you stay invested for a lengthy duration. A lump sum can offer growth sooner. 


However, remember that SIP investments spread your risk and protect your capital. If you want to do the same with a lump sum investment, you may need to be aware of market movements and invest at the right time. 


SIPs allow you to benefit from investing at different cycles and do not require any planning or prior knowledge. So, consider your risk appetite and understanding of markets before you choose between SIP or a lumpsum investment in mutual funds.

Things to Consider When Investing in Mutual Funds

Here are some crucial points to keep in mind when planning your mutual fund investment:

  • Assess your risk tolerance and financial capacity 

  • Review your investment goals and horizon

  • Check and compare the past performance of schemes

  • Consider the tax liability associated with mutual fund gains

  • Use online tools to gauge your risk and returns

  • Remember to diversify your portfolio to mitigate risks


You can use online tools like the SIP calculator to estimate your returns and ensure it aligns with your requirements. 


Once you finalise your scheme and mode, invest with ease via Bajaj Markets. With online tools and insights, a fast process to get started, and zero commission, you can make informed decisions for better financial growth.

FAQs on SIP vs Mutual Funds

Are SIPs and mutual funds the same?

No, mutual funds are an investment avenue, i.e., something you invest in. On the other hand, SIP is an investment mode that allows you to invest in mutual funds periodically. 

Is SIP better than a mutual fund?

SIP is a route of investing in mutual funds. As such, one is not better than the other.  However, if you want to choose between the investment modes, i.e., SIP and lumpsum, you can do so by assessing your current finances and investment goals. 


SIPs are generally better for those who want to invest periodically and for the long term. Lumpsum investment is for those who have idle funds and want to make the most of them.

How to choose between SIP and lumpsum?

If you want to make low-risk investments for the long term, you can choose SIP. You can opt for a lumpsum investment if you want to leverage a bearish market. This also requires you to have a corpus of funds ready for investment.

Which is better for profits, SIP or lumpsum?

Both investment modes, SIP and lumpsum, can result in good returns. A SIP can leverage the power of compounding over time, and with a lumpsum investment, you can leverage a bearish market. 


As such, the better option is the one that fits your current and future requirements.


However, keep in mind that lumpsum investments allow you to create a bigger corpus of funds over time if you time your investment right.

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