Are you new to the world of investing? Do you plan on investing in mutual funds via the SIP mode of investment? Look no further. This article acts as an investment guide on how to invest in mutual funds via SIP. Read on to know more.
What is SIP
Systematic Investment Plan, commonly known as SIP is a way to invest your money in the desired investment vehicle. Under SIP investment, systematic and regular installments are made towards your desired mutual fund scheme regularly.
The periodicity of the intervals can be daily, weekly, monthly, semi-annually, or annually. An investor can save as low as Rs 100 in mutual funds via SIP. There are different types of SIP an investor can choose from – regular or vanilla SIP, top-up SIP, perpetual SIP, etc.
How to invest in SIP
Investing in mutual funds via SIP is a seamless process. Just follow these simple steps to invest in SIP:
1. Analyze your investment goals and your risk profile
Understanding your risk profile is very important before you begin your investment journey. After careful analysis of your risk profile, it is equally important to understand your financial objective or what do you aim to achieve from your investments.
2. Choose the right type of investment
Selecting the right investment option must be dependent on your risk profile, financial objectives, and investment duration. Do not forget to check the past performance of the investment avenue. After finalizing the right type of mutual fund for your profile, follow these simple steps:
- Properly fill the KYC [Know Your Customer] form
- Deliver mandatory identity proofs such as Aadhar card, bank details, address proof, utility bills, etc.
- You need to provide a cancelled cheque of the SIP investment amount if you decide to go forward with the offline mode of investment. However, if you choose the online mode, you would need to fill the ECS [Electronic Clearing Service] mandate form.
3. Choose the investment date
As an investor, you have the liberty to choose a date that suits your needs. Usually, it’s advised to choose the date that you get your salary or a regular income on.
4. Decide the investment horizon
Investing in SIP is a good way to achieve your financial goals. Determine the investment horizon needed to reach your goals. You can also use an SIP calculator to understand the future value of your investments.
5. Choose between online or offline mode of investment
As an investor, you have the choice to invest in mutual funds online or offline via SIP. Irrespective of the fact that you choose online mode of offline mode, the investment amount automatically gets debited from your bank account and is used to buy mutual fund units of your desired scheme.
6. Stay invested until your financial goals are met or end of your investment horizon
SIPs are a good way to create wealth to fulfill your long-term investment horizons. Unlike lumpsum investment, you do not have to worry about timing the markets. Instead, SIP investment believes in the concept of time in the market. So, ignore the volatility associated with your mutual fund investments and stay invested until you have achieved your financial goals, or your investment horizon ends.
SIP investments are a godsend investment avenue to those retail investors who cannot afford to invest their entire investment horizon in one go. Use them properly to achieve your financial goals. Happy investing!