What Is SIP Investment?
SIP or Systematic Investment Plan has become one of the most popular ways to invest in mutual funds. This is mainly due to the ease and the flexibility it offers. SIP is an automated investment plan that helps invest an amount of your choosing in the mutual fund you want at regular intervals. These intervals could be weekly, monthly or even annually depending on your need.
Additional Read: Maximizing Your Returns with the SIP Return Calculator
Though the amount one can invest in SIP does depend on the type of mutual fund you have chosen, SIP does have one edge over other investment plans. SIP investors get to start their investment from relatively smaller amounts, sometimes as low as ₹100.
Keeping the ₹1000 investment in mind as the goal today, here’s a look at the how’s, where’s and why’s of the process of investing in SIP.
Additional Read: SIP Calculator: Everything About SIP Investment Calculator
How to start a SIP Investment
There are specific steps to consider when learning how to start a SIP. Follow this structured process to ensure a smooth investment journey.
1. Define Your Financial Goals
Before you begin, assess your financial objectives. Understanding how to do SIP starts with aligning your goals to the right mutual fund. For example, ask yourself whether you're saving for retirement, a large purchase, or wealth growth.
2. Gather Required Documents
Here’s what you need to get started:
Proof of Identity (Aadhar, Passport, etc.)
Address Proof (Utility Bill, Driving License, etc.)
PAN Card
Bank Account Details
These documents are necessary for Know Your Customer (KYC) compliance and account setup.
3. Complete the KYC Process
Knowing how to invest in SIP involves meeting regulatory requirements. You can submit the KYC form online via your mutual fund provider’s app or website. Offline KYC can be completed at authorised financial institutions.
4. Register for a SIP Account
Once KYC is approved, create an account with your preferred mutual fund company. This can often be done via their mobile app. Registration provides access to multiple investment plans.
5. Select a Mutual Fund
Choosing the right fund is vital when determining how to do SIP effectively. Research funds that match your risk tolerance, growth expectations, and investment horizon.
6. Set Your SIP Amount and Date
Decide how much you want to invest periodically and pick a convenient deduction date. Many investors prefer monthly deductions.
7. Begin Your SIP
Submit your form and start investing. Depending on the platform, you can activate auto-debit to ensure timely investments without manual intervention.
There are a couple of steps that you need to keep in mind when investing in SIP. Here is a breakdown of them for you.
- Be clear on your financial goals:
To put your money in a SIP investment, you need to first understand which mutual fund suits you. This can be done by figuring out what your overall financial goals are and what your risk aptitude is.
- Arrange the documents needed:
It is always a good idea to have all your documents in place. Here is a list of all the documents you will need to make your SIP investment:
- Proof of Identity (POI)
- Proof of Address (POA)
- PAN Card
- Bank account details
- Passport/Driver license copy for KYC process
With the help of the required documents, complete your KYC process. This can also be done online.
- Register for your SIP Investment:
Post the completion of the KYC process, you can proceed to register for SIP. You can do this step online as well by visiting the website or mobile application of an Asset Management Company (AMC) that you trust. Just provide some basic details on the platform and you are done.
- Pick the mutual fund you want to invest in
By this time you should be clear about what mutual fund you want to invest in. So when you register for your SIP investment, you need to mention it.
- Choose your SIP amount and date:
If you are looking to invest ₹1000, then you need to specify that, on what date you want the amount to be debited each month. Make sure that you have enough funds in your account before the debit date each month, especially if you are setting up the auto-debit facility.
Additional Read: Start Investing with Smart SIPs for Your Family’s Financial Future
Gains in 10, 20 and 30 years with ₹1000 SIP investment
If you are still unsure about investing in SIP, here is a small comparison of how much you can gain in the very first 10 years.
YEAR
| Investment PA in ₹
| Gain PA in ₹
| Total Amount EoY in ₹
|
2024
| 12,000
| 670
| 12,670
|
2025
| 12,000
| 1,997
| 26,667
|
2026
| 12,000
| 3,463
| 42,130
|
2027
| 12,000
| 5,082
| 59,212
|
2028
| 12,000
| 6,870
| 78,082
|
2029
| 12,000
| 8,847
| 98,929
|
2030
| 12,000
| 11,029
| 1,21,958
|
2031
| 12,000
| 13,441
| 1,47,399
|
2032
| 12,000
| 16,105
| 1,75,504
|
2033
| 12,000
| 19,048
| 2,06,552
|
Source: Tickertape
This is just the gain you will get in the first 10 years with a simple investment of ₹1000 a month. The next 20 and 30 years will only add to your investment.
Things to Consider Before Investing in SIP
When planning how to invest in SIP, it's essential to evaluate several factors to make informed decisions. Follow these considerations to enhance your investment process:
Define Your Financial Goals
Begin by determining your investment objectives, whether it's saving for retirement, funding education, or achieving wealth growth. Setting clear goals ensures you understand how to start a SIP that aligns with your aspirations.
Understand Your Risk Appetite
Knowing your risk tolerance helps in selecting funds that suit your financial comfort level. This clarity aids in planning how to do SIP effectively and minimises unexpected losses.
Select the Right SIP Amount
Decide on a suitable investment amount that fits within your monthly budget. Consider future expenses and ensure your contribution remains consistent.
Pick an Appropriate Investment Horizon
Evaluate how long you plan to invest. For short-term goals, choose funds with moderate risk. For long-term objectives, consider equity-focused funds for higher growth potential.
Before committing to a fund, review its past performance. Understanding a fund’s consistency provides valuable insight into how to start a SIP with the potential for steady returns.
Leverage a SIP calculator to estimate returns based on your chosen amount, tenure, and fund type. This tool simplifies your plan for how to invest in SIP and visualises future outcomes.
If you're uncertain about any step, consult a financial advisor. They can assist you in selecting funds and understanding how to do SIP for long-term financial success.
By considering these factors, you ensure a well-rounded approach to how to invest in SIP, aligning with both your immediate needs and future goals.
The Bottom Line:
A SIP investment is a very convenient way to invest in mutual funds as it promises flexibility to the investors in terms of the amount that they can invest and how regularly they can invest. However, with any investment, it is important to do your due diligence and research before investing.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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