SHOULD YOU INVEST IN STOCK SIP OR MUTUAL FUND SIPS?

Individuals are often confronted with the dilemma of choosing the right investment option for their portfolio to invest their money. Two of the most prevalent types of investment options are stocks and mutual funds. This article is aimed at serving as a mutual fund investment guide for investors and solve their dilemma.

If you are sceptical about investing a lumpsum amount, you might consider resorting to other options such as a systematic investment plan, commonly known as SIP. SIP investments help to stagger your investments over time. As an investor you can either put money in stock SIP or directly invest in mutual funds through SIP. Let’s understand what works best for your investment profile.

What is stocks SIP?

Stocks SIP work on a similar concept like mutual funds SIP. Under this, an investor can buy a predetermined or fixed quantity of shares at regular or specific intervals. For instance, you might consider purchasing 10 shares of an XYZ company at the beginning of the each month. There’s another way to buy stocks SIP as well. You can specify a particular amount to be used to buy shares of a particular company. For example, you specify your fund manager to buy shares worth Rs 15,000 each month of an ABC company.

There are several broking houses today that offer investors with the opportunity of purchasing shares through a systematic investment plan. As an investor, you can also buy the shares of more than one company through the stock SIP.

So where should you invest? Stocks SIP or mutual funds SIP?

If you are an aggressive investor, you might consider to invest in stocks SIP. When you invest in stocks SIP, you have to pick the stocks that best suit your portfolio and make a decision when to enter and exit the markets. However, when you invest stocks at regular intervals, you reduce the risk of timing the market.

When you invest in a stock SIP, you expose your investments to company-specific risks if you do not opt for the right stock. However, when you invest in mutual funds via SIP, you delegate your money in a basket of stocks across several sectors. Thus, investing in mutual funds helps to diversify one’s investment portfolio. Investing in mutual funds SIP, you also protect your investments from volatility faced by stock markets. What’s more, when you invest in mutual funds, a fund manager professionally manages your investments and chooses the right stock for your portfolio.

You might consider investing in stocks SIP only if you belong to the category of seasoned investors in the stock market. If you are new to the investing world, it is advised to stick to mutual funds SIP.

Lastly, always ensure that your investments align with your financial goals, risk appetite, investment horizon, and other factors. Happy investing!