How to invest in SIP? Everything You Need to Know

Due to their potential to yield returns over a longer period, SIPs have become one of India’s most often-used investing strategies. Investors are now considering investing through SIP to gain attractive returns.

Indian mutual funds presently have around 8.20 crore (82 million) SIP accounts, through which investors often make investments in Indian mutual fund schemes. But as a beginner, you may want to know how to invest in sip in India. Here is a detailed overview of how to invest in sip for beginners.

What is a Systematic Investment Plan (SIP)?

The Systematic Investment Plan, or SIP is a method of investment offered by mutual funds. Rather than making a lump sum investment, one might deposit a defined amount in a mutual fund scheme on a regular basis at fixed intervals, such as once a month.

Investing in SIPs over the long term allows you to take advantage of the Power of Compounding, limit risk, and maximise potential rewards. Starting a mutual fund investment through SIPs doesn’t need a significant capital investment. A monthly instalment for a SIP might be as low as ₹ 500.

SIP removes the need for continual portfolio monitoring and instils the habit of saving. Additionally, if you keep making periodic investments through both the highs and lows of the market, you don’t have to stress about timing the market.

How does SIP work?

Your registered bank account is automatically debited with a specific amount when you set up your SIP. A certain number of fund units equal to the amount you invested are purchased each time you invest in a mutual fund scheme through a systematic investment plan (SIP). A systematic approach pays off in bearish and bullish markets, so you don’t have to time the markets.

For example, assume the fund’s NAV is Rs. 100 when you begin a SIP of Rs. 5,000. You will, therefore, get 50 units (Rs 5,000 / Rs 100) of the mutual fund plan when the SIP is deducted from your account. And if the fund’s NAV rises to Rs 110 at the time of your second SIP, you will own 45.45 units in this scenario. The power of compounding allows the SIP to yield a fair return on your investment.

How to Invest in SIP in India?

If you want to know how to invest money in SIP or how to open SIP account, here are some basic steps:

Step 1: Set Financial Goals

Determine your financial objectives, risk tolerance, and time frame for reaching them. This will assist you select the appropriate mutual fund scheme(s) for your SIP investment.

Step 2: Prepare all the necessary documents

Before investing, you must ensure that you have all the appropriate documentation. Because it is a long procedure, it is advised that you start by having all of the needed paperwork available, including

ID Proof
PAN Card
Address Proof

Also, ensure your account number and bank account information are valid. You will also need a copy of your passport or driver’s licence. If you intend to make investments other than cash, ensure they adhere to the government’s current KYC guidelines.

Step 3: Complete your KYC

You must finish the KYC process once your documents are ready and your demat account is created. This step entails validating your identity and address by supplying the necessary documentation.

You must enter your basic information, such as your name, address, PAN number, bank account information, nominations, etc. To complete your KYC, visit an AMC or RTA (registrar and transfer agent) office. You can also opt to do your KYC online.

Step 4: Sign Up For A SIP

After creating your account, you may select from various investing options to meet your goals and risk tolerance.

Step 5: Choose a mutual fund scheme

While registering for an SIP, you must also mention the fund you would like to invest in. It would help if you chose the scheme based on your risk-taking capacity, investment horizon, and investment goals.
Before selecting the fund, you should also analyse the fund’s past performance, structure, expense ratio, fund manager’s track record, etc.

Step 6: Select the SIP amount and date

Select a date that is convenient for you.  Multiple dates can be selected for various SIPs within a given month. This phase involves determining how much, how regularly, and on what date you wish to invest. Your account will be routinely debited for the SIP amount specified above. To avoid bank fees or penalties, you must have sufficient funds in your account before the due date.

Note that you can pay your SIP manually on the due date or automate it with the auto-debit feature. To permit the deduction of your SIP from your bank account, you must fill out an e-mandate form and obtain authorisation.

Step 7: Submit the form

The final step is to send the registration paperwork to your AMC or broker. You can register using both online and offline modes.

How to invest in sip online?

Under the online method, you must upload your essential KYC papers and the registration form. You can submit your form once you’ve submitted all the necessary documents. After completing the registration form, SMC Global securities Ltd. will open your account, allowing you to begin your SIP investment.

How to invest in SIP Without Broker?

You can make investments in a mutual fund SIP without the help of a broker in the following ways:

Examine mutual funds
Compare and analyse several mutual funds to see which ones best suit your investing objectives and risk tolerance.

Create an account
After choosing a mutual fund, you must create an account with the mutual fund company. This can be done by going to the company’s website, downloading the application, and sending it in complete with all the required documentation. Online account opening is another feature offered by certain mutual fund companies.

Select the Systematic Investment Plan (SIP) option
After creating the account, you must select the SIP option and enter the investment value, the frequency, and starting date.
Set automatic payments

After setting up the SIP, you must configure automatic payments to guarantee that the money is taken out of your bank account on the designated day and deposited in the mutual fund.

Track your investments
The website or mobile app of the mutual fund firm allows you to monitor your investments after your SIP is set up.

Conclusion

For many people in India, the systematic investment plan, or SIP, has made financial planning considerably easier. More crucially, salaried persons (most of the Indian population) may invest their money and earn larger returns by investing in mutual funds through SIP.

We hope your queries about how to invest in SIP mutual funds have been answered. In addition, remember to raise your SIPs every year. This will allow you to achieve your goals faster and establish a larger capital. Finally, to benefit from compounding, start soon so that your SIPs have more time to compound.