How to Invest in SIP

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While everyone wishes to save money for a rainy day, not everyone has the discipline to do so. But not anymore; with SIPs, you can start investing in the most disciplined and efficient manner. In fact, you can even start your investment journey with just Rs. 3000 every month.

Savings systematically with SIP can help you achieve your long-term goal, like buying a car or giving your child the best education. Even if you start small, SIP will help you create wealth through consistent savings and compounding returns.

Read this article to learn how to invest in SIP in India.

What is SIP? 

A systematic Investment Plan, or SIP, is an investment method that allows people to invest in mutual funds regularly over a fixed period. It entails investing a predetermined amount regularly, which accumulates over time to help you build a large enough for all your future financial needs.

SIP provides several benefits like-

#1. Financial discipline- SIP investments instil the value of disciplined investing. They enable the investor to commit to investing a specified amount for a set length of time. SIPs will help in long-term wealth growth.

#2. Rupee cost averaging- It allows investors to purchase more units of the mutual fund when the prices are relatively lower and fewer units when prices are high.

#3. Flexibility and convenience- The amount, duration, and period of the SIP are all customisable by the investor. Additionally, the investor can pause, terminate, and change the amount of the SIP investment as per convenience.

How to invest in SIP for beginners

Step 1- Get your KYC done

Before investing in any financial instrument, including SIP, it is necessary to get your KYC done. All you need to do is fill out an application form. This form is available at any authorised bank or post office in India where pre-paid cards are issued. You can also complete the KYC process online on the website of your preferred mutual fund house.

Here, you need to fill out your personal information such as name, address, ID proof (passport/driving licence), and a declaration about the investment for a successful KYC application.

Step 2- Register for a SIP

After you have completed your KYC, the next step is to register with an Indian broker or financial advisor with whom you want to start your SIP investment journey. After registration, you can select from various SIP investing programs that best meet your risk and requirement.

Step 3- Choose a mutual fund scheme

There are numerous mutual fund schemes to choose from. You must ensure your chosen funds align with your financial goals and risk tolerance. Moreover, analyse and compare the past performance of the mutual funds to ensure it meets your investment objectives.

Step 4- Choose the amount which you want to invest

Choose the amount you want to put into the plan. Your set amount will be deducted from your bank account on your decided date. Hence, it is critical to determine how much money you wish to invest each month or week.

Step 5- Select the date of SIP

Because your money is auto-debited from your bank account as part of the Systematic Investment Plan (SIP), you must select a specific date when it is convenient for you to pay. You can, however, select numerous days for SIP instalments per month.

Step 6- Deciding the duration of your investment

You should choose an investment duration that matches your investing and financial objectives. Use a SIP calculator to determine your returns at the end of the period. This will help you make an informed decision as you will know which fund will help you yield the desired returns in a specific duration.

Step 7- Submit your SIP application form

SIPs allow you to invest both online and offline. Select the one that is most convenient for you. If you have an online Demat account, you can start and continue your SIP online. You can also submit it offline through post offices or your bank.

#1. Online Process

#1. Create a new Demat account (if you are a new investor) or log in with your existing account credentials.

#2.  Fill out the KYC information.

#3.  Make your payment online.

#2. Offline Process

#1. Fill in the application form and the KYC form

#2. Fill out an ADF (Auto Debit Form) that requires a cancelled cheque.

#3. Provide the necessary identity verification, such as utility bills and address proof.

Things to consider before investing in SIP

#1. The financial objective of investing

As with any other form of investing, having a clear-cut investment objective helps eliminate the mutual fund options that will not contribute towards that goal. Perhaps you want to save for your child's higher education, plan a family vacation, or build a corpus for your retirement.

Before beginning a SIP of a fund, you must first examine your needs and match them with the fund's expected returns and the tenure of the return.

#2. The expected SIP returns

Knowing your SIP's estimated return will allow you to make an informed decision. For this purpose, you can use a SIP calculator. Based on our intended portfolio size, it will help you estimate how much money you need to invest each month. This calculator will display your monthly contribution and returns over time so you can understand the time it will take to reach your investing goal.

#3. The risk tolerance

You must only invest in funds whose risk level corresponds to your risk tolerance. If you are a risk-averse investor, you must invest in funds with little to no risk.

#4. Get Started with SIP

Investing in mutual funds through SIP is an excellent strategy to grow wealth than lump-sum investing since it decreases stock volatility risk. Furthermore, it gives good returns, ensuring your money grows reliably and predictably.

You can start your SIP journey with the help of the fund managers at Tata Capital Moneyfy. Our financial experts will help you pick the right mutual fund scheme and plan your SIP amount and duration that best suits your investment objectives and risk appetite.

Get in touch with us today.