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Can I hold simultaneous investments in a Mutual Fund SIP and a Stock SIP?

Yes, one can invest in both Mutual Fund SIPs and Stock SIPs. A large number of investors are adopting the Core-Satellite Investing strategy, where mutual fund SIPs are used as the core investments with the aim of diversification and bringing stability within the portfolio. Stock SIPs are satellites that have the goal of generating maximum returns on selected stocks. Thus, this helps balance consistency and an increased growth potential.

What is the initial investment required in a mutual fund SIP and a stock SIP?

A mutual fund SIP can be started with as little as Rs. 100 per month, hence making them easily accessible to a beginner investor with small funds. At the same time, a stock SIP would be dependent on the price per stock that the individual wishes to buy. If the stock price costs ₹1,000 or more per share, then a minimum of ₹ 1,000 or more per instalment would have to be put into a stock SIP.

Do stock SIPs provide better tax advantages than mutual fund SIPs?

From a taxation perspective, both stock SIPs and equity mutual fund SIPs are treated similarly. Both equity mutual funds and individual stocks held for more than one year attract long-term capital gains (LTCG) tax at 12.5% on gains over ₹1.25 lakhs every year. For investments held for less than one year, they attract Short Term Capital Gains (STCG) tax at 20%. For dividend earnings on shares as well as mutual funds held through SIPs, they get added to the tax liability and taxed based on the tax bracket of the investor.

Which is safer, a Mutual Fund SIP or a Stock SIP?

A mutual fund-based SIP often involves less risk compared to a stock SIP. The reason is that in the case of a mutual fund-based SIP, the investment is made in different companies. This reduces the likelihood of any single stock pulling down the performance of the overall portfolio. In contrast, a stock SIP is a concentrated bet, and if the selected stock underperforms or faces any business problem, the overall portfolio return will be adversely impacted. The mutual fund-based SIPs are thus beneficial in managing risk.

Which SIP is better during market volatility?

In times of market fluctuations, mutual fund SIPs relatively perform better than stock SIPs due to diversification and professional management.