Equity Mutual Funds vs. Debt Mutual Funds – How SIP Works and What Investors Should Consider When Buying

In this edition of Money Guru, Zee Business provides its viewers with advice on how to invest in mutual funds. Investment in mutual funds can be made in equity mutual funds or in debt mutual funds.

Mutual fund investments can be made as a systematic investment plan (SIP) or on a lump sum basis. We tell you when it is advisable to take the SIP route and when to take a flat rate route. To tell you more, Viral Bhatt, founder of Money Mantra, offers you his point of view.

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Comparing this to recurring deposits from a bank, Bhatt said the MF investment through a SIP route can be made monthly in pre-determined installments. The SIP can also be weekly, quarterly, semi-annually and annually. It is deducted from your accounts.

It can be a very powerful investment tool, he added.

He said the SIP could be done in debt and equity mutual funds. But it’s advantageous in long-term equity mutual funds, he added. This gives a greater advantage in terms of composing power, he added.

It also offers a lot of flexibility. It can also be started with investments of only Rs 100.

If your financial goals are short-term, then debt mutual funds are beneficial, Bhatt added.

By opting for SIP in equity mutual funds, the power of capitalization over a long period works better. The average cost in rupees also benefits in the long run. It also offers a lot of flexibility.

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