SIP is not a mutual fund

Once in a while, someone will say “Hey, can I talk to you about my SIPs?”

What they want to do is to talk about their mutual fund investments.

SIPs are not mutual funds.

If you take a loan, you pay an EMI.

If you invest in a mutual fund, you can start an SIP. But you don’t have to.

SIP is an acronym for Systematic Investment Plan.

It is a way to invest at regular intervals.

Just like an EMI is a monthly re-payment of a loan, an SIP is a monthly investment into a mutual fund.

You also have daily or weekly SIPs.

Are there alternatives to SIPs?

SIPs are just one way of investing in mutual funds.

You need not use an SIP when investing in mutual funds.

You could invest as and when you have money. This is called “lump-sum” investing.

Why SIP?

1. It is an automated way to save and invest regularly. Good for the busy and the lazy.
2. A good option when investing in equity funds. By investing slowly, you are not likely to get hit by a sudden fall in the markets.

Footnote: I pronounce the acronym as “ess-ai-pee” and not as “sip”. And that is why I write as if the word begins with a vowel sound.