Mutual Funds are beneficial for investors who have the capacity to invest a larger amount of money in one go. Whether an investor will invest their money in SIP or prefer a lump sum investment depends on their financial goals and the cash flow ability too. Thus, from the above information, we can say that the difference between SIP and Mutual Fund is that Mutual Funds are an investment channel while SIP is a mode of investment. Let us now understand the difference between SIP and Mutual Fund. There is growing confusion among investors about the difference between SIP and Mutual Fund. Thus, even small brackets of investments but done regularly, end up helping you achieve a long-term financial goal. Regular investments over a long period add up to a compounded higher return. This benefit is the power of compounding. This is how it averages out the purchase cost of the mutual funds of the investor.Īpart from that, SIP also has another major benefit, which is sometimes called the eighth wonder of the world. When you invest money regularly over a period of time regardless of the market conditions, you end up getting more units when the market condition is low and less when the market condition is high. Generally, in SIP, equity mutual fund schemes are more popular. Thus, the burden of putting in a heavy lump sum amount is omitted. Thus, an investor can invest as per his convenience and through any mode – cash or post-dated cheque or through Electronic Clearing Services (ECS) i.e., the auto-debit facility. It permits the investor to invest the money on a particular date of every month or every quarter of a year. The investor gets to invest a fixed amount of money regularly in a particular mutual fund scheme. It is the easiest way to invest in Mutual Funds. SIP stands for Systematic Investment Plan. Thus in just one year’s period, the investor will have a profit of Rs. You are in a profit because the same 1000 units can now be sold off at a net price of Rs.13,000. Now let us assume that after one year the stocks that were invested by ABC super return mutual fund rise and the net value climbs up to Rs. Initially, the fund will offer you a unit at say Rs. If it is an equity scheme then the company will invest most of the money in shares but if it is a debt scheme, in that case, the company will invest the money in several debts such as Government securities, bonds, etc. Now, there are two main concepts that you need to know. 100 crores, it invests the money in the stock markets. gathers money from the several investors say Rs. has launched a mutual fund scheme, ABC Super Return Mutual Fund. Supposedly, a company named as ABC technology Ltd. Let’s understand the concept of Mutual Funds in a simple way with the help of an example. The biggest barrier here remains that the concept of Mutual Fund is often misconceived as complicated. Generally, a longer investment holding term ensures more chances of making profits. Many investors pull out prematurely, and that can cause heavy losses. ![]() It is always advised to stay invested throughout the difficulties of the market for the same reason. In its low cycle, it might leave the investor with a lower selling price than the amount they invested. However, the Stock Market is unpredictable. It can also be said that a mutual fund is a scheme that in its first stage collects money from various investors after the collection process, the amount is then employed in buying and selling stocks, with an aim to ultimately profit the investors. The collected amount is invested in many asset classes through debt funds, liquid assets, and many other such assets. What are Mutual funds?Ī mutual fund can be defined as a pool of money gathered from investors. We have the following article to help you bury this confusion once and for all by explaining what is a Mutual Fund and a SIP and finally, throwing light on how these two are different from each other. ![]() Often people confuse investing in mutual funds with investing in SIP. One of the primary reasons for this rising popularity is the ease with which one can invest in mutual funds. Mutual funds are gaining a lot of popularity among budding investors.
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