How to Invest in SIP? – A Beginners Guide to SIP Investment in India in 2024

Know everything about How to Invest in SIP?

Investing in mutual fund schemes can be a huge decision for many amateur investors.

Investors can invest in a mutual fund either through a lump-sum investment or a SIP. Here is the Beginners Guide to SIP Investment in India.

A Systematic Investment Plan, what we know as SIP, is a mode of investment that allows an investor to invest a modest sum regularly in the mutual fund scheme of their choice.

This small sum can be as little as Rs.100 that you can invest weekly, monthly, quarterly, etc.

By activating a Systematic Investment Plan, a fixed sum gets deducted from your bank account as per the time interval of your choice.

A SIP focused on a proper approach when it comes to investing, where investors can infuse regular habit to save in their daily lives.

Systematic Investment Plans work on the simple principle of investing regularly that will enable you to build ample amounts of wealth over time.

Today, numerous AMCs, mutual fund houses, or Robo-advisory platforms have set up online transacting platforms.

One can easily invest through SIP by following the process as available on the online websites of these companies.

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How to invest in SIP? – A Beginners Guide to SIP Investment

Many inventors consider investing in SIPs as one of the safest options to invest in mutual funds. Here’s how you can invest in SIPs through these simple steps:

Step 1: Identify your Assets and Liabilities

Before you start investing in the world of mutual funds, you must have complete knowledge of your skills and capabilities.

This is necessary as mutual funds are a risky business, and investing in mutual funds through SIP requires a lot of patience.

Also, you need to assess your risk appetite according to your main goals. To generate higher returns on your investments, you must be ready to take greater risks.

But this doesn’t mean you should take unnecessary or foolish risks. You must have the required know-how and experience, so that you can take greater calculated risks.

Step 2: Recognize your main Objective

Once you have assessed your skills and capabilities, the next step is to understand what you want from your investments.

Generally, many investors invest with a particular financial goal in mind, be it buying a car or house, higher studies for their children, retirement plans, etc.

Once you have understood your investment goal, you can plan your strategies accordingly.

For example, if one intends to invest in a mutual fund to plan his/her retirement plans, he/she may opt for an investment portfolio that has more debt instruments and fewer equities.

Step 3: Select a suitable Mutual Fund Scheme

The next step is to search for a mutual fund scheme that will eventually yield the most profits to suit your main financial goal.

There are umpteen mutual fund companies in the market today that provide a wide range of services. However, not all of the companies can offer apt services for your main objectives.

The most important factor you need to consider is the past work of a mutual fund scheme. If a fund has a well-established track record, it is more likely to perform well in the future.

You also need to consider other parameters like your risk tolerance, time of your investment, fund’s management fees, number of returns, etc., before choosing a mutual fund.

Step 4: Set a Date and Time horizon

The final step is to choose on which date the bank will deduct the amount from your account monthly or as per your choice of the time interval.

A Systematic Investment Plan allows the investors to opt for an auto-payment option that eliminates the cumbersome option of tracking your investment date periodically.

For this, you need to select a convenient date, and you can also select multiple dates to route your investments. Next, you need to decide on the time horizon for your SIP.

This usually depends on an investor’s financial goal and the amount he/she is investing. You can also rely on a SIP calculator to decide the ideal time duration and amount of your investment.

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How to Invest in SIP Online? – Step by Step Process

You can also invest in a Systematic Investment Plan through online mode provided by several AMCs and Distribution Platforms. Here’s how you can start investing in SIPs online:

Step 1: Gather all the required documents

Before investing in a mutual fund, every company will ask for your valid IDs and other necessary documents to ensure you are an eligible and genuine investor.

The documents that you will require are:

• PAN Card
• Address Proof (For example, Aadhaar card, driving license, passport, voter ID card, etc.)
• Cheque book
• Passport size photograph

Step 2: Begin your KYC process

Know Your Customer is a formality that every investor has to complete before investing in mutual funds.

You will have to log into the official website of your chosen fund company to begin the KYC process. This is to ensure that an investor cannot use companies for illegal purposes or money laundering.

KYC is a one-time process where you need to fill in genuine details like full name, date of birth, contact info, etc.

Step 3: Complete your in-person verification

For the next step, you would need to schedule an appointment for a video call to confirm your identity through a webcam.

At this stage, you need to show your PAN card and address proof. An easier method is to use the Aadhaar card option, where there’s no need for a video call verification.

However, using the Aadhaar card option limits you to a yearly investment of only Rs.50,000. To extend this amount, you need to provide your PAN card details.

Step 4: Start an Online SIP

The last step is to register for the Systematic Investment Plan of your choice. This will depend on your income, expenditure, financial goals, and the final amount you’re willing to invest in a fund.

Set up a preferred date for your regular time intervals, and make the final payment via the available payment options. Also, be aware of the different kinds of SIPs available in the company.

Normally, fund houses offer Top-Up SIPs, Flex SIPs, Trigger SIPs, Perpetual SIPs, and Pause SIPs. You can easily find the differences between these various investment plans on the internet.

Why Should You Sign Up for an SIP?

There are many advantages investors can enjoy after investing in mutual funds through SIP. Some of these include:

SIPs are an effective medium for Disciplined Goal Planning

Systematic Investment Plans require you to invest regularly and are one of the most effective ways of investing.

Hence, it not only encourages you to save regularly but also incorporates a disciplined approach when it comes to investing.

SIPs bring in Rupee-Cost Averaging

With this averaging, you would buy more units when the market is low, and similarly, buy fewer units when the market is booming.

This, in turn, will decrease the cost per unit in the long run and waver off the risk of investing at the wrong time.

SIPs can act as an Emergency Fund

Apart from being completely light on your budget, Systematic Investment Plans also allow you to exit any time you want.

You can even redeem your investment whenever you want if there’s no lock-in period on your investment.

SIPs are free from Market Timing

Timing in the market can be hazardous for your wealth. Systematic Investment Plans can help you manage your market volatility very well, and you would no longer need to worry about timing your market.

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Tips to Invest in SIP in India

Here are the various strategies you must follow to invest in SIP.

Begin early

When investing in a SIP the earlier a person begins to invest, the more benefits are earned.

The regularity of investment via SIP and an early start help generate adequate returns on the investments.

Periods of 5 to 10 years often make a huge difference in the final return of SIP.

One can easily make four to five times more money by investing earlier into SIP as compared to someone who started late.

Even if the primary investment is less, one can always boost the investment in the long run.

Moreover, by earning returns on returns one can earn an adequate amount of capital to accomplish the desired goals.

Be Patient

Along with good fund management, another important factor that makes a huge difference is patience.

Investors who are patient about the investments tend to earn great returns as they do not withdraw money in the small ups and downs of the markets.

It is important to understand that when it comes to mutual Funds there is a lot of market volatility involved.

One must be patient throughout as the market tends to change faster than one can think of.

Moreover, SIP is meant for long-term goals and one must be patient enough to wait until maturity to reap the full benefit of SIP returns.

Long-Term Goal

SIP is best for long term goals and objectives. As an investor keeps adding money to the investment and also earns returns on returns through compounding, a lot of capital gets accumulated over time.

If the period is kept short, then the capital to build on also remains less, whereas in the long terms, the capital keeps on increasing.

Returns generated get cumulated until maturity. This will help in generating enough capital to achieve the goals.

Avoid Withdrawing Early

One can have emergency financial situations at any point in life. These are circumstances where one might be tempted to withdraw the SIP investment.

However, this should be avoided as far as possible. Even if one decides to use systematic withdrawal, it must be used when the fund is about to reach maturity.

Moreover while using a systematic withdrawal tool one must only withdraw the returns and keep the principal amount untouched so that they can continue generating returns.

Withdrawing the investment of SIP should be done wisely as one can lose out on a lot of potential returns.

Moreover one must not panic in low market situations as this can easily convince a person to withdraw the SIP investment. This again will lead to loss of potential Returns.

Moreover, if an investor decides to leave the market when it is low then the portfolio value will also be less.

Regular Boosters in Investment

SIP provides leverage to increase the amount of investment over time. They should be used wisely by an investor. This is because the returns are directly linked to the investments.

The greater the investment, greater the returns will be. Moreover in SIP one can also earn returns from returns, due to compounding.

This is exactly why increasing the amount of money that we regularly invest in a SIP over time will greatly benefit us in the long run.

This will make a huge difference in the returns that we earn at the end of the term.

Keep Track of Performance of Funds

When investing in mutual funds it is important to choose the right fund. The primary objective of the investment is to earn maximum returns.

One must analyze the fund’s performance regularly. This analysis should be done over a period of at least five to 10 years.

This helps the investor get a better idea of how the fund is performing with their investments.

If it shows a negative result, then it is best to withdraw the SIP investment from the particular fund and invest it somewhere else where the probability of profits is more.

Falling market

A low market is a great opportunity to invest in a SIP. Even though a low market is often seen as a time where most of the investors indulge in panic selling, it is indeed a good idea for buying more units at a low cost.

By doing so, when the market rises, so will the price of the units and this will greatly benefit the investor.

Most of the financial advisors and fund managers also suggest the same. A low market should not be seen as a misfortune but rather an opportunity to earn more.

How to Invest in SIP? – Conclusion

We hope that the entire article on How to Invest in SIP has been fruitful for you. This Beginners Guide to SIP Investment in India can easily make you a pro in SIP Investment.

As an investor, there are numerous benefits to relish by investing through a Systematic Investment Plan.

Since this method helps to accumulate wealth over the years without putting pressure on the current financial state, it is the most popular mode of investment in mutual funds.

A customer has the freedom to choose any investment period of their choice, but a long-term investment (5 years or more) usually yields higher returns as compared to the short-term investment plans.

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