What is the Difference between SIP and Mutual Fund?
5 min
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WHAT ARE THE BENEFITS OF AN SIP?
Investing via an SIP in mutual funds offers the below benefits:
DISCIPLINED
INVESTING
Promotes a regular investment habit, and since the amount is auto-debited, it requires minimal monitoring.
RISK
MITIGATION
Averages out the impact of market volatility over time, allowing you to invest comfortably without worrying about timing the market.
FLEXIBILITY &
CONVENIENCE
Allows both small and large investments. You can also pause, stop or top-up your SIP whenever you need to.
POWER OF
COMPOUNDING
If you opt for the growth option while investing, your profits get reinvested into the scheme. This way your wealth keeps growing.
HOW DO SIPS WORK?
SIPs work by investing a fixed amount regularly into a mutual fund scheme. This amount can be small and pocket friendly, making investments accessible for all budgets. As per the amount invested with each instalment, you receive a specific number of mutual fund units.
Moreover, SIPs spread out your investments across market cycles. Imagine putting ₹500 monthly in a mutual fund SIP investment. When the prices are low, you get more fund units, and when high, fewer units. Over time, this strategy averages your investment cost, reducing the impact of market fluctuations. This is also known as rupee cost averaging. Hence SIP investment plans work well in volatile markets, over both long and short terms.
TYPES OF SIPS
Now that you know the benefits of SIPs, let’s explore the different types of SIP investments
TOP-UP SIP
FLEXIBLE SIP
TRIGGER SIP
PERPETUAL SIP
HOW TO
INVEST IN SIP
If you are unsure of how to start a SIP investment,
simply follow the below-mentioned steps:
steps
01SELECT A MUTUAL FUND
Choose a fund that aligns with your financial goals and risk tolerance. You can use our risk calculator if you're unsure about your risk appetite.
steps
02KYC COMPLIANCE
Ensure your Know Your Customer (KYC) details are updated with the fund house. If you aren't KYC complied, head here: e-KYC with UTI MF
steps
03CHOOSE SIP AMOUNT
Decide the monthly investment amount you're comfortable with. You can also opt for a weekly or even a daily SIP if that works better for you.
steps
04PROVIDE BANK DETAILS
Link your bank account for automatic monthly debits. You may choose your salary account where there is a monthly inflow.
steps
05SET DURATION
Determine the duration you plan to continue the SIP for. If you're unsure, consult your financial advisor. You can always stop it whenever you want to.
steps
06SUBMIT APPLICATION
Complete the SIP application form, either online or through physical submission. Once done, you will receive a URN. Login to your net banking, visit the add biller section, and add this URN as a biller to complete the auto-debit process.
steps
07MONITOR AND REVIEW
Keep an eye on your investments and review periodically
to ensure they align with your goals.
SIP
CALCULATOR
Calculate NowFREQUENTLY ASKED QUESTIONS
SIP investment is a mode through which you can invest in a mutual in fixed, periodic instalments. To begin investing in SIP, first, choose a mutual fund that suits your financial goals. Complete the KYC process, providing necessary documents. Decide on the SIP amount and frequency, linking your bank account for automated transactions. Submit the application form, either online or physically, to initiate your SIP journey.
Yes, you have the flexibility to stop your SIP at any time. Most mutual funds allow investors to pause or terminate their SIPs without imposing any penalties. Its a convenient feature that aligns with changing financial circumstances.
The best SIP depends on your financial goals, risk tolerance, and investment horizon. Its crucial to research and select mutual funds with a proven track record, consistent performance, and alignment with your investment objectives.
When choosing mutual funds for SIP, consider factors such as fund performance, historical returns, risk profile, fund managers track record, and expense ratio. Diversify across fund categories based on your goals—equity funds for long-term growth, debt funds for stability, and hybrid funds for a balanced approach. Regularly review your portfolio to ensure it remains aligned with your financial objectives.
Increasing your SIP amount is simple. Many funds offer a "Top-Up SIP" option, allowing you to enhance your investment periodically. You can also start a new SIP with a higher amount alongside your existing one to boost your overall investment.
SIP returns are calculated using the formula for Compound Annual Growth Rate (CAGR). The formula involves the initial investment, the final value of the investment, and the time period. Online calculators or financial tools can simplify this process for you.
While the investment itself isnt tax-free, SIP returns on equity funds held for over one year qualify for Long-Term Capital Gains (LTCG) tax exemption up to a certain limit. However, SIP returns from debt funds are subject to taxation based on your income tax slab.
The choice between lump sum and SIP depends on your financial situation and risk tolerance. Lump sum suits those with a substantial amount to invest upfront, while SIP is beneficial for disciplined, regular investments, mitigating market volatility through cost averaging. Consider your financial goals and preferences when deciding between the two.
Generally, monthly SIPs are more common and convenient for most investors. They align with monthly income cycles. However, choosing between weekly and monthly depends on personal preferences and financial planning. Some opt for weekly SIPs for a more frequent investment approach.
Generally, monthly SIPs are more common and convenient for most investors. They align with monthly income cycles. However, choosing between weekly and monthly depends on personal preferences and financial planning. Some opt for weekly SIPs for a more frequent investment approach.
Yes, you can adjust your SIP amount at any time. Mutual funds offer flexibility, allowing investors to increase, decrease, or even stop their SIPs based on changing financial circumstances. This adaptability caters to your evolving investment needs.
Absolutely, you can have multiple SIPs running simultaneously. Diversifying across different mutual funds or fund categories helps in spreading risk and aligning with various financial goals. Each SIP can cater to specific objectives, providing a well-rounded investment strategy.
The maximum SIP investment amount is not fixed and varies based on the mutual fund scheme. Theres usually no upper limit, allowing investors to choose an amount that suits their financial capacity and goals. However, individual fund houses might have their own restrictions, so its advisable to check with them.
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SIP (Systematic Investment Plan) is a feature offered for a disciplined investment of a certain amount on a
pre-decided date in a specific mutual fund scheme, regularly over a period of time.
Disclaimer: *The minimum amount for SIP may vary across schemes and asset management companies. Please check the Scheme Information Document for details.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.