How to Start SIP Investment?

Deepika Chelani
Updated: 14 Dec 2021, 03:32 PM IST
TL;DR.

Since mutual fund investments can turn out to be risky because of extreme market volatility, systematic investment plan (SIP) is a convenient and effective tool to make investment in small doses at regular intervals. Here we explain the process of starting an SIP

Investors can easily start investing in the Mutual Funds through SIP by completing their KYC.

Investors can easily start investing in the Mutual Funds through SIP by completing their KYC.

Systematic Investment Plans (SIP) have gained popularity among MF investors as it is considered one of the most reliable ways of investing in Mutual Funds, as it offers the facility of investing periodically and with automatic weekly/monthly/quarterly/annual transfers.

SIP becomes a satisfactory option for investors who do not want to invest in a scheme with a lump sum amount, as there are various schemes which allow a minimum investment of Rs. 500 with SIPs.

There 6 steps to start your SIP Investment, let’s have a look at the same :

Step 1 - Understand your needs

First step definitely needs to be understanding your needs i.e., what leisure does the investor want to buy/have as accordingly time-interval of the investment can be decided. After that considering your income, debt obligation, number of dependents and other factors the risk appetite of the investor is calculated.

Step 2 - Decide SIP modes

There are two modes of SIP namely - Online and Offline.

Online SIP is definitely a hassle-free and paper-less approach, you can start your SIP journey through a Mutual Fund distributor or AMC (AMC is a company which looks out for funds of the individual). 

It is more advisable to go with distributors as they give an in-depth analysis of the upcoming schemes and do not even charge fees from the clients. And often does eKYC (often known as paperless KYC, a process of electronically verifying the credentials of a customer) for the investors.

Offline SIP is considered a rather easy approach but requires a lot of paperwork. Investors who wish to start their SIP offline can visit the fund house’s office or through any broker.

Step 3 - KYC process

KYC is an important aspect when it comes to Investing in the market in general. Therefore investors looking for investing in Mutual Funds through SIP should be done with their KYC, by depositing their address proof, cancelled cheque and photographs. Once the KYC is complete, visit the website of the fund house and choose the SIP of your choice.

Step 4 - Choose the right SIP

Choosing the Mutual Fund to SIP, is the most crucial part as it should align properly with your investment goals and future plans. Equity funds are a difficult proposition to earn wealth as they are high risk and high returns. 

Balanced funds are moderate to high risk with moderate returns, but their fair allocation does not guarantee risk free returns. 

Debts funds have low risk and low returns but are not totally risk-free. Therefore, it is important to choose the funds and then the SIP prudently.

Step 5 - Set your SIP details

After doing all the formalities, it is time for setting the SIP for the investment process. The investor can set SIP frequency, date and amount. SIP frequencies are from weekly, monthly, semi-annually, quarter-annually or annually. 

The date of SIP differs from one fund to another, and the amount can be chosen by the investor as per their choice it can be as low as Rs. 500. When the SIP amount is filled, bank account details are also required to send and SIP is auto-debited by the account.

Step 6 - Submit the common application

After deciding all the details mentioned above, a form of the SIP or common application form needs to be submitted with the intermediary selected by the investor if the investor has chosen Offline mode. 

If the process has been online then the investor is a few clicks away. In the form please remember to fill all your personal details and contact information. The investment can start once the registration is complete and the investor has received a confirmation from the fund house.

With the risk of investing in Mutual Funds because of market volatility and future uncertainty, Systematic Investment Plans (SIP) has been a true hope which allows the investors to invest in time intervals. 

SIPs are a great option for investing by investors who are not very sure about the market uncertainty and do not want to invest in one go.

 

First Published: 14 Dec 2021, 03:32 PM IST
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