SIP Vs Mutual Funds

October 7, 2021 Trading 4 min read
SIP Vs Mutual Funds

Even before we get into this topic, let us tell you this outright: Sip VS Mutual Fund cannot happen! It simply cannot. While sip vs lump sum mutual fund does happen, SIP vs Mutual Fund does not! Why do we say that? 

Let us explain. 

What is a mutual fund?

A mutual fund is an investment tool that allows you to put your money into equities, bonds, government bills, and more via just one particular scheme. Depending on your scheme, the allocation would vary. However, mutual funds are a nice way to diversify sums as little as INR 500 in various financial instruments. Moreover, mutual funds pool in money from different investors and then invests in these assets collectively. 

Now, there are two ways of investing in a mutual fund. One, by making a single purchase, it’s a one-time thing, and then, you withdraw from your scheme upon maturity. Another way is to be more regular and break your premium into smaller, uniformly divided brackets or SIPs. 

What is an SIP?

Short-form for Systematic Investment Plans, these tools invest in mutual funds. Now, you see why we said there cannot be an SIP VS Mutual Funds in the beginning. An SIP is a way to invest in a mutual fund, so while there can be an SIP vs lump sum mutual fund, there can’t be an SIP Vs Mutual fund

SIPs are made into mutual funds!

The investor follows an automated disciplined device of investment, which allows them to invest small amounts periodically. 

SIPs allow you to invest in mutual funds with as little as INR 500, as mentioned earlier. 

All you have to do is fix a schedule with your broker, who’ll automatically deduct the SIP amount from your bank and you will be granted units of the mutual fund for that amount. 

Now, bear in mind that each month, you would get varied numbers of units. Why so? Your paid amount will be used to buy the units, which sell at their Net Asset Value (NAV). This net asset value keeps fluctuating based on the market’s highs and lows. 

While we have said that SIPs and mutual funds are not different, we need you to know that not all mutual funds are SIPs. There can be such a thing as a difference between SIP and mutual funds.

The difference between an SIP and a mutual fund is that of a lump sum mutual fund.

What is a lump sum mutual fund?

As the name suggests, mutual funds can also be purchased in volume by making a single buying decision. However, unlike SIPs, collective purchases do not get you the benefit of a varied NAV. When the net asset value for a share drops in a month, you can always purchase it cheaper. Moreover, investing regularly earns you compounded interest. Plus, it has been found that SIPs are far more convenient and recalled than lump-sum payments, which often get buried in oblivion.

Difference between SIP and mutual funds

  • Rupee average costing: When you invest using SIPs, you get the benefit of a bearish market. A bearish market is when the prices of equities are low, meaning your mutual fund scheme too can get you more units than it got you in the last month for the same payment! Thus, investing regularly can help you lower your average buying price. 
  • Benefit of compounding: When you invest using SIPs, you get the benefit of the power of compounding. For each SIP, there is a compound interest involved, which goes out the drain if we have made a single investment. Thus, lump-sum payments derive low returns.
  • Flexibility: It may not be possible to make lump sum payments less than at least INR 5,000, but SIPs begin with INR 500 and can always be topped up or triggered. Keep in mind there is a Flexi SIP too, which allows you to waiver the premium on every payment.
  • Convenience: SIPs are automatic once on the roll. Every time you make a lump sum payment, you have to get bank transfers done and brokering agents too.
  • Stoppage: While you cannot withdraw from lump-sum investments before maturity, you can stop your SIP anytime. Withdrawing early in either instance would incur a penalty or exit load. 
SIP Mutual Funds Lump-Sum 
Benefit of Compounding yes No
Rupee Average Costing yes No
Flexibility Yes No
Convenience  yes No
Stoppage Yes No

Top-performing mutual funds with SIP in India

Mutual funds in India have multiple categories, like multi-caps, tax savings, large-caps, small-caps, mid-caps, etc. We have prepared a list of some of the best mutual funds in each category with an option for SIPs. 

Fund Name Category
Kotak Standard Multicap Growth. Multi Cap Fund Growth
Motilal Oswal Long Term Equity Fund-Regular Plan-Growth Tax Savings Scheme
Mirae Asset Large Cap Fund Regular Growth Large Cap Fund Regular Growth
Axis Bluechip Fund Growth Large Cap Fund Growth
Invesco India Growth Opportunities Fund-Growth Diversified Fund
Mirae Asset Tax Saver Fund – Regular Plan-Growth Tax Savings Scheme

These recommendations and not endorsements. Depending upon your financial goals and the span you can get your money locked in for, you should choose your mutual funds. Also, look into the past returns and NAV of similar shares in your category. 

For instance, if you have chosen a retirement saving mutual fund, compare it with others that claim to be great for retirement savings. With mutual funds specially designed for tax-saving purposes, you should compare how the real savings count. Investors must practice vigilance before investing their hard-earned money in any mutual fund. 


With no confusion on the fact that SIPs and mutual funds are not parallel concepts but rather coinciding, investors are suggested to consider SIPs over lump sum investments, especially when it comes to mutual funds that keep fluctuating with the course of the share market. 


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