A Systematic Investment Plan is a structured method of investing in a chosen mutual fund. The plan involves predetermining and assigning a certain amount of funds for investment at recurring time intervals, most commonly every month.
How do SIPs work?
A large sum of money is not needed to start investing through an SIP. One can start by just sparing an amount as small as ₹100 per month. SIP eliminates unpredictability of market timings as one invests consistently even during ups and downs. One can earn a substantial amount of profit by investing in SIP as the returns on the investments compound over time which give higher return and form a cycle bearing high profits and averaging cost in the long run.
When should one start?
There is no fixed mantra or time to start investing in a SIP. Since there is a minimum risk, the sooner one starts, the better it is. The first step to starting a SIP is setting a financial goal in mind. You can then choose a mutual fund that aligns with the goal.
READ MORE: Mutual Funds: Why should you not stop SIP despite volatility
How to start investing?
There are multiple services online that can be used to shortlist funds based on your goals if you’re facing trouble while choosing. After this step comes picking the SIP parameters and selecting a fund house that suits you best. There are different types of SIPs that one can choose i.e. top-up SIP, flexible SIP, and perpetual SIP. One can also customise a plan.
After you have made a final choice, register for SIP in the selected mutual fund and you can invest after completing the KYC process. The KYC process is quite simple and can be done online by submitting a few documents and validating identity through a video conference.
SIPs are a low-risk investment option fitting for investors who want to start with small capital. These plans instil a financial discipline in the investors and can be customised according to individual financial objectives. All in all, it is a great option for beginner investors.