A lot of people get confused about mutual funds and SIPs as different investment products and ask us which is better?
What if I were to ask you a counter question? What is the difference between drinking water and water?
Transcript:
Hello Everyone, welcome to the 2nd episode of #MoneyKiBaat
I am your host Anmol Gupta and today we will talk about SIP and Mutual Funds.
So, it's often asked that what is the difference between SIP and Mutual Funds or, which is better among the two?
So, asking difference between Mutual Fund and SIP is like asking what is the difference between water and drinking water.
This must be sounding very illogical, right?
Because this is illogical!
You can't compare SIP and Mutual Fund because SIP is just a way of investing in Mutual Funds.
Just like a camel can drink a lot of water at once you can invest a lot of money at once in Mutual Funds which is called as Lump Sum investment.
And just as we humans drink little little water at regular intervals, you can invest some money at regular intervals in Mutual Funds.
For example, you can invest some money every month say Rs. 5000 a month. It's called as Systematic Investment Plan or SIP.
So SIP is a very good way of investment for salaried people who get a fixed amount of income every month, their expenses are also more or less fixed so they broadly know how much money they will save by end of the month that they can invest.
Another example for this is Fixed Deposit vs Recurring Deposit... when you want to put a lump sum amount in Bank, you can open a fixed deposit and put all the money at once. In a Fixed Deposit, you put all the money at once and you get principal plus the interest at maturity. And if you want to invest every month in bank's deposit you can open a recurring deposit where you invest a fixed amount every month with bank and you get back all your money with interest at maturity.
So I hope that you have understood the difference between SIP and Mutual Funds and next time you will not get confused between these two terms.
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