Stock SIP vs Mutual Fund SIPs| Which is Better?

In this article, we will discuss:

Beyond Mutual Funds: Exploring the Benefits of Direct Stock SIPs

If you are not satisfied with the returns of regular SIPs and want to tread into something with a higher return potential, then Stock SIP can be just the financial instrument for you. People often confuse it with mutual fund SIPs, but they are two very different investment options. To protect your money and invest responsibly, it is your duty as an investor to research financial instruments through which you want to make your investments. Hence, to help you in your research, we have covered the meaning and benefits of stock SIP along with how it is different from mutual fund SIP.

Meaning of Stock SIP

Some investors often feel conflicted about investing in equity stocks, whereas others don’t get satisfied with the regular SIPs in mutual funds. It is in this case that SIP in equity stock steps in. Just like any other SIP, it is also a systematic investment plan that allows you to make regular investments of a fixed amount or quantity based on your choice. The only difference is that through this investment instrument, you invest in equity shares. Hence, instead of buying a large quantity of shares in one go, you can break your investments in smaller quantities and spread the investment at regular intervals.

Key Features and Benefits of Stock SIP

For a better understanding of the concept, here are some of the core features and benefits of stock SIP that you must know before investing.
  • Just like regular SIPs, stock SIPs also allow you to make investments in equity shares and Exchange-traded funds (ETFs), like niftybees, autobees etc.
  • Since you need to choose the stock based on your research, it is a more suitable investment mode for seasoned investors. New investors can end up suffering losses if they choose the wrong stock.
  • It helps you inculcate a disciplined investment habit by pushing you to purchase stocks at regular intervals. Depending on your convenience, you can choose to make the purchase either weekly, monthly or even quarterly.
  • Some shares in the stock market can be really expensive, thus not allowing you to purchase a high quantity in one go. However, with stock SIP, you can start by fixing a small quantity of shares and gradually increase this quantity as per your convenience. Thus, it gives you the liberty to start small.
  • Since it is based on the rupee cost averaging method, it allows you to spread your risk over the course of your investment tenure.
  • Due to rupee cost averaging, your overall average cost of acquiring the total number of shares also comes down.
  • Make sure you calculate the historical SIP performance of a stock by using a stock SIP calculator. These can help you give the performance estimation and the return generated in the past by the particular stock you want to invest in.

Stock SIP vs. Mutual Funds - Differences

While both types of SIPs allow you to invest in equity shares and ETFs, there are several key differences that set them apart. Refer to the table below for a better understanding.

Basis Stock SIP Mutual Fund SIP
Diversity It is a concentrated investment plan because you invest in just one share with one plan. It is a diversified investment plan where the fund manager can alter the portfolio at his/her discretion.
Ownership of shares At every SIP date, when new shares are added, you get direct ownership of those shares. You get ownership of mutual fund units, which consist of several underlying shares. Hence, you own the shares indirectly.
Management The responsibility to manage your plan lies with you; hence, you make all the decisions. The fund manager manages the fund and makes all the decisions about the portfolio.
Experience level It is more suitable for seasoned investors who know how to analyse the market and pick a stock. It is a beginner-friendly investment plan because the fund manager makes all the crucial decisions.
Risk It carries more risk because all your bets are placed on the performance of just one stock. Due to the wide range of stocks involved in the portfolio, mutual fund SIPs carry lower risk.
Expenses and Charges You pay the brokerage and depository charges as you would while buying a share in the cash segment. Charges include expense ratio, exit load, and many other charges that you will have to pay.


If you know how to research the right stocks and are confident in your skills, stock SIPs can be a good investment choice. However, if you are not quite familiar with the functioning of the stock market and don’t know how to analyse stocks, mutual fund SIPs can be a better option. Also, don’t forget to analyse the suitability of both the instruments and how they align with your goals before zeroing in on any of them. To be able to make better investment decisions and optimise your returns, you should also choose a trading and investment app that meets the fast-paced needs of the stock market. If you also resonate with this thought, check out the New-Gen Samco trading app today!

Frequently Asked Questions

Q1. What is the meaning of frequency in stock SIP?

Ans. It is the interval at which you want your SIP dates to fall once your plan starts. You can go for a monthly, quarterly or semi-annual plan, and the investment will be made on a particular date only.

Q2. What do you mean by Equity SIP request?

Ans. It is a set of instructions you give to your broker to buy shares on your behalf as per the stock SIP plan.

Q3. If my stock SIP doesn’t perform well, can I change the stock?

Ans. Irrespective of how your stock performs, if you have started the SIP in a stock, you cannot change it. You can, however, cancel the plan after the minimum investment time has passed.

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