1 April, 2025
Synopsis
A Mutual Fund is an investment product, and SIP is a method of investing in Mutual Funds.
You can invest a lump sum amount in a Mutual Fund or invest smaller amounts at regular intervals through SIP.
SIPs allow you to start Mutual Fund investments with amounts as low as ₹500.
Mutual Funds are an investment vehicle, wherein the fund manager gathers a pool of money from investors to invest in stocks, bonds and other assets. They are actively or passively managed, and you do not have to choose the specific stocks or commodities to invest in. Instead, your fund manager, along with their team of professional analysts, manages and operates these funds for you.
On the other hand, investors also enjoy a lot of freedom when it comes to investing in Mutual Funds; investing in Mutual Funds can be done as a lumpsum payment or through a Systematic Investment Plan (SIP).
An SIP is not a product in itself; instead, it is a method of investing money in a Mutual Fund scheme. Let us understand the differences between Mutual Funds and SIP so you can start your investment journey.
What is a Mutual Fund?
A Mutual Fund is a pool of funds gathered from multiple investors designed to reach a specific fund goal while minimising the risk for investors. This pool of investment is invested in various financial instruments like stocks, bonds, commodities etc. When you invest in a Mutual Fund through your Demat Account, you buy units of that fund instead of directly buying the securities. Mutual Fund investments bring a distinct level of diversification which can act as a cushion against the volatile nature of the market.
Mutual Funds give you a lot of flexibility when it comes to investments. As stated above, the two primary methods of investing in mutual funds are SIP and lumpsum payment. As the name suggests, SIPs allow you to systematically invest a certain amount in a Mutual Fund scheme at predetermined intervals, while lumpsum payments allow you to purchase units of the fund with a single transaction.
What is an SIP?
A Systematic Investment Plan (SIP) is a method of investing in Mutual Funds. It lets you balance your investment over a given period of time. With SIP, you can pay a small amount regularly towards a Mutual Fund scheme. The periodicity of these payments can be weekly, bi-weekly, monthly, or quarterly. The allure of a SIP is that it allows you to invest regular amounts in a Mutual Fund and build a good corpus over time while also promoting financial discipline.
SIP is a disciplinary way of investing, especially for beginners. This lowers the entry bar for beginners, giving them an easy and convenient way to get involved in the financial markets. The minimum contribution amount required to commence your SIP investment is only ₹ 500.
SIP Vs Lumpsum Mutual Funds: Key Differences
If you are confused about the difference between Mutual Funds and SIP, imagine Mutual Funds as a gym membership. You can pay the yearly fee upfront (lump sum) or opt for a monthly subscription (SIP) to make it more manageable for you.
Feature | SIP | Lump Sum Investment |
Investment Mode | Small and regular contributions. | One-time large investment. |
Risk and Returns | Balanced risk and returns due to rupee cost averaging and gradual wealth accumulation. | The entire amount exposed to market fluctuations but potential for attractive returns if invested at the right time. |
Investment Discipline | Encourages disciplined investing. | No recurring commitment. |
Best For | Beginners or those with steady income. | Investors having access to a large sum of money. |
SIP vs Lumpsum Mutual Funds: Which is Better for You?
A lump sum investment in Mutual Funds can be beneficial when the equity market is bearish, as the returns may be higher compared to an investment made in a bullish market.
Generally, SIP could be a potentially safe investment method since it adjusts to the equity market fluctuations and allows you to benefit from rupee cost averaging.
Ultimately, the choice depends on your financial objectives, risk appetite and market conditions. Therefore, it is important to do thorough research before making a decision.
Mutual Funds are a diversified pool of securities that minimise the risk for investors. At the same time, a Systematic Investment Plan (SIP) is a method of investing in a Mutual Fund scheme. SIP is a good way to invest small amounts at fixed intervals. You can even use the HDFC Bank SIP calculator to gauge the potential returns from your SIP.
FAQs
Is SIP a safe investment?
SIP reduces market risk through rupee cost averaging but does not eliminate risk entirely.
Does SIP guarantee returns?
No, SIP returns depend on market performance and fund selection.
Can I withdraw my money from SIP anytime?
Yes, you can. However, funds like the Equity-Linked Savings Scheme (ELSS) have a three-year lock-in period.
How To Invest In Mutual Funds Via HDFC Bank NetBanking
Follow these steps to invest in Mutual Funds via HDFC Bank NetBanking:
Log in to HDFC NetBanking using your Customer ID & Password.
Go to ‘Investments’ → ‘Mutual Funds’ and select ‘Purchase Mutual Funds’.
Choose the Mutual Fund, select Lump Sum or SIP, enter the amount, frequency, and duration.
Select your HDFC Bank account, verify details, and authorise payment via OTP/NetBanking PIN.
Track your investments under ‘Investment Summary’.
To learn more about SIP or to apply for a Demat Account at HDFC Bank, click here.
Read more about lumpsum investing or SIP investing and its benefits here.
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. This is an information communication from HDFC bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.