New Delhi: Investors are always on the hunt to grab interesting investment opportunities. While, there is the bulk of investing options available in the financial market, from hedge funds to systematic Withdrawl Plans (SWP), Unit Linked Insurance Plans (ULIP) and many others. Mutual funds are the kind of investing tool that are the most prominent ones.
However, in many instances, most people often confuse Mutual Funds with SIP. This is a misconception that both instruments are the same. The very basic difference between both the financial choices is that Mutual Funds is an investment product and SIP is one of the method of putting money in Mutual Funds.
Mutual Funds
As the name goes, it is a pool of assets, created by an asset management company (AMC), in which a person investing can get ownership of units in proportionate to his/her investment.
In it, the investor is free to choose if he/she wishes to infuse money in equity funds, debt funds or hybrid funds. The particular decision depends on a person’s risk-bearing capacity as well as their financial goals.
Mutual funds help in maintaining a balanced portfolio as it provides a way to diversify investments to eliminate the risks associated with the several assets grouped together in Mutual Funds.
The capital Market-based instrument also comes with tax easiness as it gives liberty to those investors who invest in Equity Linked Saving Scheme (ELSS) Mutual Funds- an open-ended equity Mutal fund that fundamentally deals in equities and equity-related products.
Investors get benefitted by investing in ELSS Mutual Funds as it qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. An individual can invest up to Rs 1,50,000 in a financial year to avail of the tax benefit.
SIP
A systematic Investment Plan (SIP) is a regular fixed amount, which gets invested in Mutual Fund Scheme. An individual can put his/her money into Mutual Funds either in a lump sum or via SIP.
SIP is not dissimilar from Mutual Funds rather it is a part of it. It sets a sense of discipline in a person indulged in it, through SIP a person invests systematically over a period of time in Mutual Funds. Thus, creating a corpus and providing a wealthy portfolio as per the financial needs of investors.
(Written by- Mahek Nigam)
