I'm confused between SIP and Mutual funds.

Tejas Khoday

Co-Founder & CEO, FYERS
#2
Phew! This is a pretty basic query. When you invst in a mutual fund, there are 2 main ways of doing it:

1. Lumpsum investment - You basically put a sizeable amount in an MF scheme at once and wait for returns. It's a standard way of investing.

2. Systematic Investment Plan (SIP) - You invest a fixed sum of money in an MF Scheme once in a month / periodically over a period of time (1 year, 3, years, 5 years are common). SIPs are more convenient for the salaried class because they don't have large savings but they can afford to save a bit every month and invest so that they can build a corpus in the long-run. SIPs are also useful to small businessmen who can afford to save a specific amount of money every month without having to reinvest it in their business.

Which is more profitable? Ideally, it depends on timing. For instance, if you invest in a lumpsum at the right time, then you stand to gain a lot if the market goes up from there. However, if you invest lumpsum at the wrong time, you can make losses too. So basically, lumpsum investing makes most sense in trending markets. Whereas SIPs make most sense in sideways or falling markets. Why? Because your average price will be lower. If you invest through SIPs in a trending (rising) market, you're losing out because every month you will have to pay a higher price for the same stocks in the portfolio. You know what I mean?
 

afin

Rocky Mountain Doomsday Guy
#3
SIP are mutual funds only. Since you do investments on a systematic basis - like for 6 or 12 months , it is called a systematic investment plan. Best to invest in a fund that is a good mix of debts and equity. If I were you, I will pick something like an ELSS - Equity Linked Savings Scheme. Check out a site like valueresearch -- you will fund analyses pertaining to a truck load of them all :)
 

soft_trader

Well-Known Member
#4
Which is better:
1. Fixed SIP amount or,
2. SIP topup (got this concept from ICICI MF website in which SIP amount increases every year by a fixed percentage)
 
#6
SIP is just a tool/method through which you can invest in a mutual fund. The other method of investing in a mutual fund is through a one time investment or lump sum amount. Mutual funds allow you to invest in either equity mutual funds or debt mutual funds or a mix of both including government securities , bonds , t - bills etc.

So , if one does not want to invest directly in these markets or want to avoid risk , then they can opt for SIP. A SIP therefore , allows you to invest in a fixed fund in a mutual fund scheme on a regular basis i .e at a predefined regular intervals. It is like a recurring deposit .

Some best mutual funds for SIP are – SBI Bluechip Fund , HDFC small cap fund , TATA retirement savings fund.
 
#7
What's the most profitable yet secure option out of the two? How can I get started with it?
This depends on the conditions of stock market. During upward trends, the lump sum mode of mutual fund investment tends to give relatively higher returns. On the other hand, investments via SIP generally provides higher returns during falling markets.
 

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