Stock SIP Vs Mutual Fund SIP: Know the Better One For You

Investing regularly is one of the best ways to grow your money and Systematic Investment Plans (SIPs) make it easy. But when it comes to SIPs, you now have two choices. You can invest in a stock SIP or mutual fund SIP. 

Both are good options but they work very differently. Read on to understand each option to decide which one suits your financial goals better.

What is a Stock SIP?

A stock SIP lets you buy shares of specific companies at regular intervals. You can choose to invest weekly, monthly or even quarterly. Here, you choose the companies and the investment amount. Your broker’s platform then invests that amount automatically.

You can think of it as setting a reminder that invests for you every month. If the stock price is low, you end up buying more shares. If the price is high, you get fewer. But you stay invested no matter where the market is headed.

For example, let’s assume you invest ₹2,000 a month in Tata Motors. The app will buy as many shares as possible with that ₹2,000 every month. Over time, you build a portfolio of direct stocks.

This method works well if you want full control over what you invest in and prefer tracking specific companies.

What is a Mutual Fund SIP?

In a mutual fund SIP, you don’t buy stocks directly. You invest in a fund. The fund manager uses your money to buy a mix of stocks, bonds and other securities. Based on how much you invest and the current NAV (Net Asset Value), you receive units of the fund.

Let’s say you put ₹3,000 every month into an equity mutual fund. The fund might invest in companies like Infosys, HDFC and Reliance, all in one go. You don’t have to manually choose the stocks. The fund manager does that for you.

It’s a passive way to invest. You stay invested and the manager takes care of the rest.

Stock SIP vs Mutual Fund SIP

Here’s a comparison of SIP in stocks vs SIP in mutual funds in detail: 

Feature	Stock SIP	Mutual Fund SIP
What you buy	Specific company shares	Fund units (basket of assets)
Who manages it	You pick and manage stocks individually	A fund manager makes decisions
Diversification	Limited (you choose multiple stocks)	Built-in diversification
Risk	High if stocks underperform	Moderate, depending on fund type
Taxation	12.5% LTCG after ₹1.25 lakh, 20% STCG	Same tax rules, but applied to fund gains
Dividends	Credited directly to your account	Reinvested or paid based on fund type
Charges	Brokerage per transaction	Expense ratio (annual fee)
Control	Full control over selection	No control over the selection of individual stocks
Ideal for	Active investors	Beginners or passive investors

The choice between SIP in mutual funds vs SIP in stocks depends on how involved you want to be. Stock SIPs give you full control, while mutual fund SIPs are easier to maintain.

Which Option Suits You Better?

Still unsure whether to choose a stock SIP vs mutual fund SIP? Here’s a simple breakdown to help you decide based on your investing style and goals:

Stock SIP

• For hands-on investors: Ideal option if you enjoy researching companies and feel confident in making investment decisions. 
• You want control: You get to decide which stocks to invest in and monitor their performance. 
• Comfortable with risk: Since it’s less diversified, a dip in one stock can affect your returns. So you must have a larger risk appetite. 
• Long-term focus: Best if you want to stick with selected companies for years.

Mutual Fund SIP

• For beginners: This is great if you want to invest regularly but don’t want to spend time picking stocks.
• You trust experts: A professional fund manager decides where to invest your money. It’s based on thorough research and market trends.
• Better for diversification: Your money is spread across many companies. This makes it a relatively safer choice.
• Goal-based investing: Great tools for saving for a house, retirement or education.

The choice between SIP in mutual funds vs SIP in stocks ultimately depends on your goal, time commitment and risk appetite. In fact, some investors even choose both. You could start with mutual fund SIPs and later add stock SIPs when you’re more confident. This way, you enjoy the benefit of expert-managed funds while gradually exploring direct stock investments.

Having said that, if you ever face an urgent need for funds, you don’t have to pause or stop your SIPs. You can opt for a Loan Against Mutual Funds with Fibe. This option lets you borrow up to ₹10 lakhs against your existing investments without liquidating them. 

So download the Fibe App now to explore this hassle-free funding option!

FAQs

1. Can I start a stock SIP with a small amount of money?

Yes. You can even begin with ₹500 or less, based on the stock price. It’s a great way to start small and stay consistent.

2. Is there a lock-in period for stock SIPs?

No. Stock SIPs are flexible. There’s no lock-in. You can pause, stop or change your plan any time.

3. How are dividends handled in a stock SIP?

Dividends from your stocks go straight to your bank or trading account. And dividends from mutual funds are usually reinvested. That’s one key difference to consider when comparing SIP in stocks vs SIP in mutual funds.