Differences between mutual funds and SIP
- What is the difference between mutual funds and SIP?
- What is mutual fund ?
- what is SIP ?
Some people do not understand how SIP is different from mutual funds,
so here we are explaining it in detail for their information.
Differences between mutual funds and SIP
Mutual Fund
Mutual Fund is often known as a portfolio of stocks or bonds, which invest according to the fund's investment objectives and is made available to investors for purchase as a unit of funds managed by professionals. At the end of each trading day, the price of all the holdings of the fund is worked out and the net asset value of the fund is calculated NAV. Mutual funds can be purchased with lump sum investment or through a systematic investment plan (SIP).
SIP (Systematic Investment Plan)
SIP is initiated by an investor who regularly invests a predetermined amount. For example, you can set a SIP of 1000 per month to buy a mutual fund unit. You will have to buy a predetermined order on a fixed date of each month. This method of investment offers two major benefits: easy savings and average cost of money i.e. cost averaging.
Differences between mutual funds and SIP
For example, a total investment of 2000 per month in two different mutual funds of 1000 will be a SIP. But mutual funds are not an investment strategy like SIP. Mutual funds are a professionally managed fund in which the manager invests according to the prospectus of the fund.
SIP long term investment
Starting SIP makes it easier to budget for retirement or other investment goals. When you decide to invest a small amount in the monthly budget, it is more likely that you continue the plan for a long time, making it easier to achieve your investment goals. For example, it is relatively easy to invest 1000 per month for retirement savings, but it may be more difficult to invest 12,000 at a time.
Cost Averaging
Investing in mutual fund units by SIP on a regular basis can reduce the unit share average cost. There are likely to be opportunities for volatility in the market over time where units of mutual funds are purchased at a lower price. The technology, called Rupee cost averaging, is a widely used strategy by many investors and is also recommended by financial advisers. A systematic investment plan, or SIP, means making regular contributions to your investment account to secure future requirements. money cost average is actually SIP in the simplest form.
Mutual Funds and SIP
While SIP is a great way to invest while increasing your wealth, once you deposit a large amount you can adopt some defensive strategy that includes more active management of your fund.
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