Is SIP and mutual fund the same thing?
No, SIP (Systematic Investment Plan) and mutual funds are not the same thing, but they are closely related.
A mutual fund is an investment vehicle where funds from multiple investors are pooled together and invested in various securities such as stocks, bonds, or a combination of both by professional fund managers. Mutual funds offer investors the opportunity to invest in a diversified portfolio with relatively small amounts of money.
On the other hand, SIP is a method of investing in mutual funds. It allows investors to contribute a fixed amount of money at regular intervals, typically monthly, into a mutual fund scheme of their choice. Instead of investing a large sum of money at once, investors spread their investments over time through SIPs. This systematic approach helps in averaging out the purchase cost of mutual fund units and potentially reducing the impact of market volatility.
In essence, SIP is a strategy for investing in mutual funds, providing investors with a disciplined and convenient way to invest regularly over the long term. So while mutual funds are the investment vehicles themselves, SIP is a method used to invest in them.