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SIP In Stocks Directly Or SIP Of Mutual Funds: Which Is Better?


Investing in equities can be done in two ways - either directly or through mutual funds. Also, it can be done through a lumpsum or a Systematic Investment Plan (SIP), where an individual invests a small sum every month.


SIP of stocks directly or mutual funds

There are investors, who systematically invest small sums of money every month, directly into stocks. There are others, who prefer to do it through mutual funds.

SIP In Stocks Directly Or SIP Of Mutual Funds: Which Is Better?
Now, those who do SIPs through mutual funds, have some advantages and disadvantages. For example, the disadvantage is that there are various costs associated, which they bear directly or indirectly. These include management fees, entry load, exit load etc., which reduces the returns.

On the other hand, those investing directly, do not have to incur such costs. However, there are many advantages of investing directly in mutual fund SIP. One of them is that you get professional help. Every mutual fund has an equity research team and also a professional fund manager, which helps them with investing in a professional manner.

On the other hand this expertise, may not be available to an individual, who invests directly in stocks. Of course, if the individual investors has good knowledge, he can go ahead and do so.


Another worry is that placing money systematically in stocks directly would also involve, regular monitoring and time. If the individual has that, than it is good, or else one would have to seek SIPs through mutual funds.

Fund managers of mutual funds have great fundamental, technical, industry and knowledge of macro economic fundamentals. This enables them to take better and calculated risk.

Over the last few years, equity mutual funds have given great returns to investors. Over the last 3 years, equity mutual funds have given returns of near 11 per cent, which is a great statistic. In fact, they have beaten the benchmark indices, the Nifty and the Sensex.

This goes to show that fund managers have a proven track record, when managing money.

Having said so, it is not as if an individual with knowledge of shares and stocks, cannot generate better returns. Of course, he can with good advise and knowledge. However, as mentioned earlier, that does require time as well, due to frequent monitoring of performance.

All in all, if you have the time and the knowledge, you can go ahead and start a stock SIP, or else, you can look at SIPs through mutual funds.

Read more about: sip systematic investment plans
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