SIP Investing – A Step-by-Step Guide to Getting Started

SIP stands for Systematic Investment Plan, an investment instrument that allows investors to regularly invest a small amount towards their selected mutual fund scheme. Investors enjoy the flexibility of choosing their investment frequency, amount, term, and date. The best thing about investing in SIPs is that they mitigate the risks while promoting financial discipline among investors. Moreover, it lets investors efficiently operate in falling and rising markets to claim benefits. If you are new to SIP investments and want to know how to invest in SIP, this stepwise guide will clear all doubts.

Deciding Upon the SIP Investment Amount

The first step is to evaluate your investment goals and the corpus required to determine the SIP investment amount. Several factors may affect this decision, including your affordability, investment horizon, and risk appetite. A SIP Returns Calculator helps calculate SIP return and investment amount according to your goals and risk appetite. For instance, if you earn Rs. 1 Lakh per month, a monthly SIP investment of Rs. 2,000 will be too low. Similarly, if you earn Rs. 25,000 per month, a monthly SIP of Rs. 5,000 will be too high. Ideally, you should invest 10-20% of your monthly income via SIPs.

Setting SIP Investment Goals

The primary objective of any investment instrument is to achieve good returns while putting your money at minimal risk. Consider diversifying your investment portfolio across various asset classes according to your risk tolerance. Diversification also delivers maximum returns on investments. Look into these factors when choosing a mutual fund for investment:

• Total asset size 
• Mutual fund house’s reputation
• Age of the mutual fund

Selecting the Right SIP Frequency

SIP investments can be weekly, monthly, quarterly, semi-annually, or annually. You must choose the SIP frequency according to your earnings and disposable income. Small investments at regular intervals help build a corpus and deliver the benefit of compounding interest.

Calculating Your Risk Appetite

Understanding your risk appetite is crucial before knowing how to invest in SIP. Based on this, you can set your investment goals and fetch a portfolio with a mix of equity and debt.

Choosing an Appropriate Mutual Fund SIP Scheme

There are different types of mutual fund schemes available for investment, including equity, debt, and hybrid funds. The fund scheme you choose must align with your risk appetite, investment goals, and investment horizon. Look at the fund’s past performance and zero in on a scheme that fared well in fluctuating market conditions.

Visiting the Selected Fund House’s Official Website

After selecting the right mutual fund SIP scheme, you can start the SIP plan online through the selected fund house’s official website or app. Look for the ‘New User Registration’ option and provide your basic details like bank and PAN number to register.

Completing the e-KYC and Creating a New Account

First-time SIP investors must complete the e-KYC procedure using their Aadhaar card. The process takes just a few minutes. Once the fund house verifies your KYC, they create a new user account and give you a username. Create a password for your online account and remember it for future transactions.

Reading the Fine Print

Read the fine print before finalising a SIP plan. Give due consideration to the cost structures, minimum SIP amounts, exit load costs, NAV application, etc. Also, check the fund objectives, the fund manager’s performance, and the fund’s portfolio in the fact sheet.

Setting Up Payment Frequency and Mode

After creating the account, you must set up the Calculate SIP return amount, duration, debit date, etc. Decide how to pay the SIPs, whether through Electronic Clearing Service (ECS), Direct Debit, Post-Dated Cheques (PDCs) or National Automated Clearing House (NACH). For PDCs, you must sign a few cheques and hand them over for the NACH mandate. 

Make Your First SIP Payment

Once the SIP starts, you can make your first SIP payment and step into the world of mutual fund SIP investments.

Now that you know all about the SIP investment process, beginning your investment journey is no longer challenging. The earlier you start your SIP investments, the higher opportunities you create for wealth creation. So start investing in SIPs today and secure your future.