We have come a long way from the times when roti (food), kapda (clothes), and makaan (house) were the only necessities required by a human race. Today, internet and SIP (Systematic Investment Plan) have made their place in this list as well. You must have often heard millennials following the concept – “SIP it, shut it, and forget it”, rather than the old age saying – “Buy low, sell high”. What brough this difference, you may wonder. Well, millennials today are smart enough to understand that timing the markets is quite complicated and may not always work in their favour. Hence, SIP mutual funds are highly popular among young investors today.
Note that, you do not invest in SIPas SIP is not an investment product in itself. Rather, it is an investment tool that helps to invest in mutual funds. Though investors are often familarised with the concept of investing in mutual funds via SIP, very little investors know that they can invest in stocks via SIP too. But, which is better? Stocks or mutual funds? This article aims to answer the same.
What is stocks SIP?
Stocks SIP work in tandem toSIP mutual funds. For instance, you might want to buy 20 shares of an ABC company on the 5th date of each month. You can do this with the help of stocks SIP. There’s one more way to purchase stocks SIP as well. You can define a specific investment amount to be allotted to purchase shares of a particular company at regular intervals. For instance, you can ask your fund manager to purchase shares worth Rs 20,000 of XYZ companyeach month.
There are several broking houses and asset management companies (AMC) today that provide investors with the opportunity of buying shares through an SIP.
So where should you invest? Mutual funds SIP or stocks SIP?
If you are sometime with a high-risk appetite, you might consider investing in stocks SIP. When you invest in stocks SIP, you are required pick the stocks that best align with your investment portfolio on your own. Further, you are required to make the decision of when is the opportune time to enter and exit. However, when you invest in stocks at periodic intervals, you diminish the risk of timing the market. What’s more, when you invest in a stocks via SIP investment, you expose your investments to company-specific risks.
However, when you invest in mutual funds through a systematic plan, you diversify your assets in a basket of stocks across several companies and sectors. Thus, mutual fund investments helps to diversify your investment portfolio. Thus, investments in mutual fund SIPs are ideal for risk-averse investors. What’s more, when you invest in mutual funds, a professional manager manages your funds and takes all the investment decisions on your behalf.
Whether you choose to invest in mutual funds online or stocks entirely depends on your investment portfolio. Irrespective of the type of investment chosen, always ensure that yourinvestments are in line with your financial objectives, investment tenure, risk profile, and other factors. Happy investing!
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