Difference Between SIP and Mutual Fund

Many investors might get confused with the concepts of SIP vs mutual funds. This article will discuss them in detail along with their differences.

SIP vs Mutual Fund

Even though both SIP and mutual funds invest in the share market, they are not the same. This section will look at SIP vs mutual funds separately.

What is SIP?

SIP (Systematic Investment Plan) is not a separate product but a way to invest in mutual funds. It helps you to systematically invest in a mutual fund plan over a certain period. 

Some key factors about SIPs are - 

What are Mutual Funds?

Mutual funds refer to an investment tool that gathers the investors’ money, like you, and invests it in bonds, stocks, or other similar assets. 

Some noteworthy points about mutual funds are -

There are two ways you can invest in mutual funds - lumpsum amounts or through recurring installments. When you set an amount to be deducted periodically to be invested in mutual funds, it is referred to as an SIP.

Difference Between SIP and Mutual Fund

As SIP is a way for you to invest in mutual funds, there are not many major differences between the two. Here is a gist of the difference between SIP and mutual fund - 

Criteria SIP Mutual Funds

Investment Process

Done periodically

Can be done in lumpsum or through SIPs

Charges Incurred




Both are equally liquidated forms of investment





Mutual funds are a good tool for long-term investments. It allows you a lot of flexibility in terms of managing your portfolio as well. You can invest in lumpsum or in recurring installments. 

Both ways may be used to invest in the same stocks, and you can choose the one that meets your needs.

Difference Between SIP and Mutual Fund - Related FAQs

No, SIPs are not tax-free. They are a form of investment, and you have to pay taxes for your profits.

Both SIPs and mutual funds may be investing in the same stocks and will have the same portfolio exposure. Thus they both have the same risks, but since SIP investments happen over a long period of time, they help even out volatility in the market.

You can withdraw SIP at any time unless there is a pre-decided lock-in period.

Both the daily and monthly investments will give you the same protection from volatility. But in case you want to make long-term investments, daily SIPs are better.

Yes, there are several options available if you want to start an SIP for only 1 year.

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