Being an investor, you must have always wondered which one is better: a SIP or a mutual fund. In this article, we will tell you all about sip vs mutual funds so that you can make an informed decision about your next financial investment. SIPs and mutual funds are high-risk investment options that also allow higher returns in the long run. While a mutual fund is an investment instrument, an SIP is a component of mutual funds and is the investment method. To find out which investment option is best for you, read on.

What is a Mutual Fund?

In mutual funds, money is pooled by an asset management company consisting of experts and professionals from individual investors and then reinvested in various companies. It is a high-risk, long-term scheme where the individual gets to decide their risk tolerance and, depending on their financial objectives, can invest in equity funds, debt funds or hybrid funds, and more. 

Benefits of Mutual Funds

  • The biggest advantage of mutual funds is that the assets are managed by professionals and experts who analyze and invest in suitable companies. 
  • A mutual fund offers several payment methods, including one-time lump sum payments and regular investments, making them a viable option for people with large amounts of money ready for a one-time investment and for people who want to invest small amounts regularly. 
  • Investors can manage risk by investing in various industries and companies, allowing investors to diversify portfolios. The risk associated with one asset class is offset by the risk associated with the other, allowing investors to avoid losing their entire investment if one of the assets experiences a rough period.
  • The minimum tenure of mutual funds is one day, and the maximum tenure is limitless. 
  • For expert investors, mutual funds allow them to find customized investment plans according to their investment needs.
  • Mutual funds are high-impact investment schemes.

What is a SIP?

A SIP or a systematic investment plan lets you regularly deposit small amounts of money in any mutual fund scheme. The first important aspect while understanding the difference between SIP vs mutual fund is that SIP is a component of mutual funds. Beginners and salaried personnel often prefer it since it allows for regular staggered investment and can be a viable long-term investment option. Starting a SIP is extremely simple and eliminates the need to monitor interest rates since the investments are made regularly.

Benefits of SIP

  • The biggest advantage of SIP is the tax benefits people get when investing in SIPs for over a year. 
  • SIPs are beginner friendly since they are easy to start, and one can track their assets according to their convenience. 
  • SIP offers periodical investment options like weekly, monthly, or quarterly and is thus preferred when income flow is consistent, aka salaried investors.
  • Since the SIPs are in open-ended funds, it lets you withdraw and deposit money whenever you want. 
  • SIP allows you to profit through rupee cost averaging. When the market is down, you can purchase more units and increase your purchasing value. Similarly, when the market is high, you can purchase fewer units. 
  • The tenure for SIPs is a minimum of one day and a maximum of three to five years.
  • SIP is a low-impact investment method.


Based on the benefits above, it becomes apparent that both mutual funds and SIPs offer a high return on investment yet are also risky. The final decision to invest in SIP vs mutual fund depends on the investment method that aligns with your financial goals, investment objectives, asset allocation, and risk profile.