Complete guide on how to do SIP investment
A SIP, or systematic investment plan, is a type of mutual fund investment scheme in which you invest a fixed amount periodically. The SIP investment has been quite popular among Indian mutual fund investors. A SIP allows you to invest money in a controlled manner without caring much about market performance and volatility.
So, let’s see how to make a SIP investment and its benefits.
How to start investing in SIP:
Investing in SIPs becomes relatively easy, once you understand how much and how often you should invest. For investing in a SIP, you will require an investment account with completed KYC. You can make your account KYC-compliant by submitting the documents to the investment agency.
KYC process for SIP:
Before beginning the SIP investment, you will require the following documents for a successful KYC process:
- PAN card
- Address Proof (Voter ID, Aadhaar, Electricity Bill, or Driving License)
- A passport-size photograph
- Chequebook (for bank details)
Now that you have all the necessary KYC documents, it’s time to start the KYC process.
- Start by visiting the respective website where your funds are housed.
- Click on the eKYC process.
- Now, fill in all the required details, like name, DOB, and other information.
- You will be required to upload documents such as your PAN card, address proof, and photographs.
Once you have completed the above-mentioned steps, go for the in-person verification. You will be required to ascertain your identity on a live video chat. You must show your PAN card on the webcam during the live verification process.
Alternatively, you may also use your Aadhaar card for KYC verification. The Aadhaar verification option is an easy process. To use the Aadhaar verification option, follow these steps:
- Enter your Aadhaar number and request an OTP on the registered mobile number.
- Enter the OTP and click on “submit.”
- All essential details will be filled in automatically.
However, if you have opted for Aadhaar verification, the yearly investment limit is only Rs 50,000. To increase the yearly investment limit, you must provide the PAN details.
Once you have completed the KYC process, you can invest in any mutual fund scheme by registering for it.
The registration process for SIP:
After completing the KYC process on the platform of your choice, go for the SIP of your choice.
- For this, visit the website of the chosen fund house and locate the link for opening a new account.
- After clicking on the link, you will be taken to a new page where you must fill out the details and complete the registration process.
- You may also be asked to choose a user ID, password, and bank account details for automatic debit.
- After completing the registration process and receiving confirmation, you can start investing in SIPs.
Select the right SIP plan for you:
Choosing the perfect SIP requires some research and consideration. Before choosing a SIP mutual fund, you must consider factors such as your income, expenses, financial goals, and funds available for investment.
Benefits of investing in SIPs
There are several benefits of investing in SIP mutual funds besides being a disciplined way of investment. Let’s see some benefits:
Rupee Cost Averaging:
One of the best features of investing in SIP is rupee cost averaging. With this feature, you buy more units when the market is low and sell them when it goes up. Traders believe the rupee cost-averaging feature helps lower the overall investment cost. Moreover, it also lowers the risk of investing at the wrong time in the market.
Flexibility:
A SIP mutual fund gives excellent flexibility to investors. With a SIP investment, you can avoid investing in schemes such as the Public Provident Fund or unit-linked insurance funds. SIP investments are open-ended, meaning you can withdraw the funds at your convenience. Moreover, you can also withdraw partially or fully without incurring any financial loss.
Start low and go with the flow.
You can begin investing with as little as Rs 500 per month using a SIP investment plan. The investment amount is flexible, meaning you can increase or decrease it as you like. However, you must remember that the longer you invest, the more you will get.
Higher Returns and the Power of Compounding:
A SIP mutual fund creates wealth by compounding the principal investment amount. This compounding accelerates profit generation and helps you grow your portfolio. Moreover, compared to traditional investment methods such as fixed deposits (FD) and recurring deposits (RD), the returns from SIP are double.
Types of SIP investments:
There are 5 types of SIP investment plans; let’s see each of them briefly.
- Regular SIP:
A regular SIP is the most basic form of a SIP investment plan. In this scheme, you can invest either monthly, bimonthly, quarterly, or half-yearly. Moreover, you can also choose the duration, amount, and frequency. However, once you have decided on the contribution amount, you can’t change it later.
- Flexible SIP:
A flexible SIP, or “flexi SIP,” is quite similar to a regular SIP; however, you can change the amount of contribution whenever you want.
- Top-Up SIP:
Also known as the Step-Up SIP, this plan allows you to increase the investment contribution at pre-decided intervals.
- Trigger SIP:
A trigger SIP invests in a mutual fund only when a specific event occurs. The events could be anything from market movements to NAV.
- Perpetual SIP:
A perpetual SIP has no fixed duration and goes on until you decide to stop contributing to it. You will need to send a stop instruction to the fund house to stop a perpetual SIP.
Conclusion:
Investing in a SIP mutual fund is among the safest investment options. Investing in a SIP mutual fund may be your best option if you want to secure a safe future. However, check for the best SIP investment plans to get a better return before investing.
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