When investing in the stock market, Systematic Investment Plans (SIPs) have become a popular option among investors. SIPs allow you to invest a fixed amount of money at regular intervals like monthly, daily, and weekly, helping you ride out market up & down and benefit from the power of compounding. However, when choosing between Stock SIP and Mutual Fund SIP, investors often find themselves confused. In this blog post, we will explore the key differences between Stock SIP vs Mutual Fund SIP, including taxation implications.
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What is Stock SIP?
Stock SIP involves investing a fixed amount of money at regular intervals in individual stocks. This approach allows you to benefit from the potential growth of individual stocks, but it also comes with higher risks.
What is a Mutual Fund SIP?
Mutual Fund SIP involves investing a fixed amount of money regularly in a diversified portfolio of stocks, bonds, or other securities. This approach provides a lower-risk investment option, as the risk is spread across various assets.
Key Differences between Stock SIP vs Mutual Fund SIP
| Criteria | Stock SIP | Mutual Fund SIP |
|---|---|---|
| Risk | Higher | Lower |
| Diversification | Limited | Diversified |
| Returns | Potential for higher returns | Lower but stable returns |
| Management | Self-managed | Professionally managed |
| Fees | No management fees | Management fees apply |
| Liquidity | Higher liquidity | Lower liquidity |
| Investment Minimum | Lower | Higher |
What are the best Stocks for SIP?
According to Angle one here are Best Stocks for SIP Based on last 5-yr CAGR
| Name | Market Cap (₹ in crore) | 5Y CAGR (%) | 1Y Return (%) |
| Tata Power Company Ltd | 1,14,313.27 | 36.68 | 73.92 |
| Tata Motors Ltd | 2,98,951.33 | 35.27 | 98.05 |
| Sun Pharmaceutical Industries Ltd | 3,18,139.82 | 24.44 | 28.38 |
| Reliance Industries Ltd | 18,54,777.91 | 22.42 | 22.18 |
| Bajaj Auto Ltd | 2,06,776.44 | 21.83 | 104.52 |
| ICICI Bank Ltd | 7,03,964.54 | 21.53 | 16.60 |
| Larsen & Toubro Ltd | 4,90,548.80 | 21.11 | 65.24 |
| Infosys Ltd | 6,67,499.27 | 18.73 | 8.93 |
| NMDC Ltd | 61,938.35 | 18.05 | 64.47 |
| Mahindra and Mahindra Ltd | 1,94,505.51 | 17.42 | 23.07 |
What are the best Equity Mutual Fund for SIP?
Best SIP Plans for 3 and 5 Years in Equity Funds
| Funds Name | 3 Year Return | 5 Year Return |
| Quant Small Cap Fund Direct Plan-Growth | 67.91% | 22.49% |
| Tata Digital India Fund Direct-Growth | 37.81% | 22.25% |
| ICICI Prudential Technology Direct Plan-Growth | 51.73% | 21.60% |
| SBI Technology Opportunities Fund Direct-Growth | 36.75% | 20.84% |
| Aditya Birla Sun Life Digital India Fund Direct-Growth | 40.10% | 20.80% |
| Quant Tax Plan Direct-Growth | 51.73% | 21.76% |
| Quant Mid Cap Fund Direct-Growth | 46.37% | 19.21% |
| Quant Active Fund Direct-Growth | 46.72% | 19.29% |
| Quant Infrastructure Fund Direct-Growth | 40.10% | 20.80% |
| Axis Small Cap Fund Direct-Growth | 38.50% | 18.34% |
Taxation Implications in Stock SIP and Mutual Fund SIP
Stock SIP:
- Short-term Capital Gains (STCG): 20% tax on gains from stocks sold within 1 year.
- Long-term Capital Gains (LTCG): 12.5% tax on gains above ₹1.25 lakh from stocks sold after 1 year.
- Dividend Distribution Tax (DDT): The effective rate of Dividend Distribution Tax (DDT) of 17.65% means:.
Mutual fund SIP:
- Short-term Capital Gains (STCG): 20% tax on gains from mutual funds sold within 1 year.
- Long-term Capital Gains (LTCG): 12.5% tax on gains above ₹1.25 lakh from equity-oriented mutual funds sold after 1 year.
- Dividend Distribution Tax (DDT): The effective rate of Dividend Distribution Tax (DDT) of 17.65% means:.
- Indexation Benefit: Available for LTCG tax calculation.
FAQ:
Stock SIP vs Mutual Fund SIP which is better for beginners?
Mutual Fund SIP is recommended for beginners, as it provides a diversified portfolio and professional management.
Stock SIP vs Mutual Fund SIP Which offers higher returns?
tock SIP has the potential for higher returns, but it also comes with higher risks.
What if I invest 1000 rs in SIP for 20 years?
Investing ₹1,000/month in SIP for 20 years with 12% return:
Total Investment: ₹2,40,000
Maturity Value: ₹9,99,148
it would become around 10 lac
