SIPs can be a great way to begin investing in mutual funds. Keep reading to learn how to start a SIP investment, the steps involved, and some important factors to consider.
Systematic Investment Plan, or SIP, is a type of investment in which you invest a fixed amount of money periodically, typically monthly or quarterly, in a mutual fund scheme of your choice. The idea behind SIP is to average the cost of investment by making regular investments of a fixed amount over time.
SIPs have become a popular way of investing in mutual funds as you can start with a comfortable amount initially and alter it anytime based on your financial standing. They can also lower the volatility risk by spreading the investment amount over a period of time rather than investing a large amount at once.
So, let’s understand the steps involved in starting a SIP.
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How to Start SIP Investment?
The online mutual fund investment process is the quickest and the most hassle-free way to start a SIP. Following are the steps involved.
Step 1: Complete the KYC Process
You need to be KYC (Know Your Customer) compliant before you can invest in mutual funds. It’s a one-time process that requires the following documents.
- PAN card
- Address Proof
- Passport-size Photograph
- Bank account details like a cancelled cheque
You can visit the official website of your preferred fund house to complete eKYC. Once the KYC is complete, you can invest in any mutual fund without repeating this process.
Step 2: SIP Registration
- Visit the website of the asset management company
- Register yourself in the new investor
- Select the mutual fund you want to invest in.
- Choose SIP in the Investment Type under Scheme Details.
- Provide some personal information as asked.
- Provide investment details, including SIP amount and frequency of payment.
- Make the payment to complete purchasing the SIP.
Factors to Consider Before Starting Your SIP
Determine Your Investment Goals
Start by figuring out what you want to achieve through your investments. For instance, you may be investing for long-term wealth creation, buying a house, or creating a corpus for your retirement. A SIP calculator can help you zero down on the right amount based on your goals and risk profile.
Evaluate Your Financial Position
Take stock of your current financial position by assessing your income, expenses, and debt. This will help you determine how much you can afford to invest each month.
Choose the Right Mutual Fund
You can use SIP in almost all types of mutual funds. You just have to select the SIP option in an online mutual fund while making the investment. However, selecting the right mutual fund that best suits your investment goals and risk tolerance is crucial.
For instance, if you want to increase your chances of getting high returns over the long term, a SIP in a diversified equity mutual fund may be a good option.
Read the Policy Documents Carefully
The mutual fund policy documents contain all the details like minimum SIP amount, exit load charges, and other important information. Therefore, it’s a healthy practice to go through the policy documents before you start the SIP.
Monitor and Review Your Investments
Periodically review the performance of your mutual fund after beginning the SIP. Consider adjusting your SIP amount if your financial situation or investment goals change.
The best thing about SIP is you don’t need to time your entry. Keep investing regularly for the long term, and let the compounding work its magic on your investments. So, when do you plan to begin your SIP?
