I'm confused between SIP and Mutual funds.

Tejas Khoday

Co-Founder & CEO, FYERS
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?
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 :)


Well-Known Member
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)
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.


Active Member
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.


Well-Known Member
SIP:Investing in anything on scheduled intervals (MF,LIP etc.. to reduce the fluctuation of market.
MF is one of those instruments.

Beware:Your advisor might allure you into buying ULIP etc...
if you want to invest in anything...read about it's pros and cons thoroughly on internet..
In our definition it is Small is Powerful. An SIP is a small investment which is made every month in a mutual fund which the intern invests in equity stocks to benefit from the rising stock market of the country.

Isn't it Risky? That would be the immediate next question. We at Sushil Finance, love to do research constantly about the products we recommend. Our study shows that on a rolling return basis, no mutual fund has ever given a negative return over 5 years. This one line has a lot of depth in it. In any 5 year period of the market, starting at any point the returns from an SIP has been positive and that is the risk that one should look at. Now if there is sufficient data to prove that money will never go negative on a 5 year basis then why is there a worry about risk? An investor has to just plan his minimum time frame of 5 years and start investing.

The benefits are many.
1. Even the most seasoned stock investor cannot time the market which is a proven and accepted norm a SIP gives an edge over this and doesn't look at market timing.
2. By investing a small amount every month your net worth is not going to get affected at all in any way, so the fear of losing your savings should go.
3. By diversifying into 4-5 schemes you get the intelligence of the best of the fund managers in the country for a very small cost. This is a huge advantage that no one talks about. Getting access to the best of the brains in the country for a very small fee is something that is missed out.

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