Investing in a mutual fund can be a wonderful experience when you have an idea about SIP investment. A systematic Investment Plan (SIP) is a low-risk way of earning money from the secondary or capital markets.
Most investment vehicles like Unit-Linked Insurance Plans (ULIP Plans) or Mutual Funds (MF) offer setting up SIPs. Read below to know in detail about how to start sip and other factors in SIP:
What is SIP?
SIP is a long-term investment tool that allows for regular, automated investment choices. The SIP investment plan can be done monthly, quarterly, or yearly. Consider SIP as a seed that, with time, grows into a large tree. The tree steadily gets bigger without your constant attention.
In the stock market, SIP refers to investing a small amount of money on a regular basis. This allows your investment to develop steadily, like a tree, without a need for constant care.
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Factors to consider for choosing the best SIP
SIP is one of the best and most profitable ways to invest, but before knowing how to start sip, you have to consider the factors given below:
Set long-term objectives: Choose the time duration after deciding on the goals to invest in a SIP. It can be a financial goal, getting married, buying a house, paying for a child’s education, etc. So, choose the plan carefully.
Past performance and returns: Analyzing the fund’s past performance and return rate might help you identify if it will work in volatile markets. Investors can make better decisions by carefully analyzing the stock.
Expense ratio: If your research comes down to funds with comparable characteristics, the expense ratio might help you distinguish between them.
Asset diversification: It is preferable to allocate assets based on risk appetite with the right kind of SIP investment strategy. The level of risk tolerance during market turbulence is referred to as your risk appetite.
How to invest in SIP?
If you are not sure how to start sip investment, just take the following steps:
1. Keep all the necessary documents.
You need to have all the necessary documents ready before you can invest. The documents include:
• ID Proof
• PAN Card
• Address Proof
Make sure your bank account details are correct. A copy of your driver’s license or your passport is needed. If you plan on making investments other than cash, then you should comply with the current KYC norms.
2. Register for a SIP
To start investing in a SIP, you need to register with the Indian broker or financial advisor who you would wish to work with. After registering, you can choose from different investment plans that suit your needs and risk appetite.
3. Choose the right plan.
If you do not choose the right plan, it will not be easy to get a good return on the investment. Every plan will be different and will include additional features and benefits.
4. Choose the amount you want to invest.
Carefully choose the amount you need to invest in the scheme. It is important to choose how much money you want to invest every week or month. This will depend on how often you may need money and how much it will be worth at the given time.
5. Choose the date of your SIP.
Select a date of SIP according to your convenience. In a certain month, one can choose multiple dates for various SIPs.
6. Submit the form
After choosing the mutual fund company, you can start the SIP by submitting the form both online and offline. If you have an online Demat account, you can submit your SIP online. You can also submit it offline through post offices or your bank.
Signing up for a SIP is a simple and free process. Most brokerages and banks offer plans to set up automatic deposits into mutual funds or indexes. You can start and invest in SIP online on your own with the help of an online investment service. Buy individual stocks or bonds directly from a financial advisor or online broker.
- Offline process
- Fill out the KYC form and application form
- Fill the cancelled cheque along with ADF
- Provide the necessary identity proofs like utility bills, address proof, etc.
- Online process
- If you are a new investor, create a new account or log in with the existing account.
- Fill in the KYC details
- Complete the online payment
Tips for investing in a SIP
When someone begins investing, they often have many questions, like how to start mutual fund sip or how to invest in a SIP. The following tips would be very useful when one considers to start an SIP:
- Be patient and keenly observe the market trends. The investments made in the capital market are usually subject to risk or volatility, so quick decisions could have an adverse effect on your returns.
- Investing a minimum of 50% of the total amount in equity-linked SIPs that have the highest 5-year returns. It will help in guaranteeing a strong return on investment.
- Keep your investments for longer time period. Long-term investments usually yield higher returns as they allow for the correction of market volatilities over time.
- Whenever there is a market dip, frequently switching between your mutual funds or ULIP plan’s assets will simply increase costs. It will also lower the overall return that your fund or plan is expected to generate.
- Leaving a plan in the middle usually results in missing out on profitable days when the investment could have yielded a larger return. So, it is always advisable to either get professional assistance or fully understand how to invest in SIPs.
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Setting SIP Goals
The goal of any SIP investment is to make sure that your portfolio has reduced risk. Diversification is very important to get maximum returns on your investments. The mutual fund you decided to invest should meet the following criteria:
- The total size of the mutual fund is important.
- The longer the period of SIP, the better the result would be.
- Always choose a reputed mutual fund broker
- The SIP investments should be in sync with your bank.
Final thoughts
Now, you would have known how to start sip. A SIP is an innovative and simple mode for investing money in mutual funds. With SIP, an investor can invest a fixed amount through monthly or quarterly investments. It is a better way to earn money than lump-sum investing as it reduces the volatility risks in investing in stocks.
FAQs
1. Is SIP a good investment or a bad investment?
SIP is a good investment method for investors who would like to invest regularly in a disciplined way.
2. Can a person withdraw SIP at any time?
Yes, a person can withdraw a SIP at any time if there is no lock-in period. It usually comes with ELSS schemes.
3. Is SIP safe?
SIP is considered one of the safest investments, but like any investment, it carries a certain level of risk as well.
4. Is it possible to start SIP in smallcase?
Yes, it is possible to start SIP in smallcase. You can choose a monthly SIP when making a fresh investment, or from the investments, select a smallcase and click the “Start SIP”.
5. Which SIP is best for beginners?
Investing in the ULIP or mutual funds with a five or 3-year return is considered the best SIP investment for beginners.
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Hello there, my name is Phulutu, and I am the Head Content Developer at Nivesh Karlo. I have 13 years of experience working in fintech companies. I have worked at Policybazaar, Paytm Money, Investopedia, and others. I love writing about personal finance, investments, mutual funds, and stocks. All the articles I write are based on thorough research and analysis. However, it is highly recommended to note that neither Nivesh Karlo nor I recommend any investment without proper research and read all the documents carefully.
