Systematic Investment Plans or SIP allow you to invest a pre-decided amount in mutual fund schemes periodically and benefit from the compounding effect. Once you decide the amount and the frequency of investing via SIP to the mutual fund company, the amount is automatically deducted from your bank account. All the top mutual funds in India offer investors the option to choose the lumpsum method of investing or go the SIP route, according to their financial position.
The SIP option encourages you to be a disciplined investor while offering exposure to rising as well as falling markets and benefiting through rupee cost averaging. But how to go about it? Let’s find out.
Steps in SIP Investment
Now that you have decided to invest via the SIP route and reap the benefits of rupee cost averaging and compounding, you need to identify the mutual fund scheme in which you wish to put your money in. You will also need to check the formalities required to start your investment. Here are some steps to get started with SIP investments:
- Identify Your Financial Goals and Risk Appetite: Investing is done with a purpose. So, the first step is to identify what you wish to achieve and how much risk you can bear for the same. So, take stock of your financial positions, your assets, and liabilities and identify how much money you can spare every month or quarter for investment purposes.
- Choose a Mutual Fund Scheme: Once you are clear about the investment objectives you need to finalise a scheme that can help you achieve your goals. Compare the different options available and choose a scheme or schemes that offer you the right mix of debt and equity investments. You can even compare the performance of different mutual funds to identify the ones which can help you achieve your financial goals.
- Start the Investment Process: Once you finalise the mutual fund scheme, you need to decide the amount and the duration of investment. You can use an SIP calculator for the same. The calculator helps you analyse the probable returns on your investment of a specific amount for a specific period.
- Check the Terms and Conditions: The top mutual funds in India also offer the SIP option of investment but some of them even give you a flexible option wherein you can increase or decrease the SIP amount according to your cash flows. But the general duration of SIP investment is one year, 3 years and 5 years. Choose a term according to your investment goals.
- Choose the Online or Offline Options: You can make your SIP investments online as well as offline. This requires you to apply along with certain documents to complete the mandatory Know Your Customer or KYC process. You may also need to complete certain other formalities before starting the investment.
- Check Allocation of Units: The number of units allocated to you depends on the Net Asset Value of the units on the day of your SIP investment. And every time you invest, fresh units are added to your account, but the number of units may vary due to the change in the NAV.
Get ready for a new financial journey that inculcates discipline, prevents you from short-term volatility, and helps you achieve your financial goals.