Systematic Investment Plans (SIPs) enable you to periodically invest a small amount toward a mutual fund scheme. SIPs can encourage regular investing habits and lead to risk management. But a lot of investors are clueless about starting an SIP investment. Explore this article to understand the steps regarding how to start SIP investment.
Step 1: Open the Website of Your Fund House
Proceed to the website of your fund house offering the mutual fund scheme you want to invest in. Look for the option to register yourself on the website. It will lead you to a new window where you will be required to provide your details to complete the KYC process. While you can visit the physical office of the fund house for the registration process, doing it in the online mode seems more convenient.
Step 2: Select the Best SIP
Next, you will have to focus on choosing the right SIP for an online mutual fund according to your investment goals. Initially, you will have to determine how much you should invest. Consider how much you need to invest and how much you can afford to invest according to your income and investment goals.
Next, you must determine when to invest the amount. To determine the date, you can consider when your salary and other income come in. This information will be useful later to set up the date on which the SIP investment should get debited.
You also need to determine what you should invest in according to your risk appetite. If you are ready to take high risks, you should go for equity-linked plans. But if you are a risk-averse investor, you will benefit from balanced or debt funds.
The huge variety available in the market might confuse you. But evaluate the market trends and past performance of the funds carefully to make the right decision.
Step 3: Evaluate the SIP Fine Print
Once you have chosen the best SIP, you should make an effort to read the fine print before singing it. You should carefully evaluate the cost structure, minimum investment amount, NAV application, exit load, and more. You should also stay fully aware of the fund objects and the performance of the portfolio and manager of that fund.
Step 4: Payment Setup
Once you have created your account and read through the terms and conditions, you will have to set up the payment structure online. In this step, you will specify the SIP amount, debit date, duration, and more.
Additionally, you need to decide how you are going to make the SIP payments. You will be able to choose between Post-Dated Cheques and the auto-debit option.
PDCs are quite troublesome because multiple cheques need to be signed and sent to the nearest branch of your fund house. Therefore, the auto-debit option is extremely convenient. To choose the auto-debit option, you will have to fill up the NACH form.
Download the NACH form online and fill it up. Send it to the fund house or upload a scanned copy online. The form will provide your bank with the instruction to auto-debit.
Step 5: Get Started
Your SIP will begin one month after submitting the NACH form. Keep sufficient funds in your account for at least two days before the debit date.
You should always choose SIPs for the long term. Once you begin an SIP, don’t stop it in between to avoid losing the benefit of long-term compounding. Additionally, increase the SIP amount with an increase in your income for optimum wealth generation.
- Is SIP suitable for beginners?
SIP is particularly beneficial for beginner investors due to its low investment requirements and low risks.
- Can I withdraw funds from an SIP scheme anytime?
You can withdraw funds from an SIP scheme anytime, but there are some limitations.
- Can I stop SIP at any time?
Yes, you can cancel your SIP any time you want, but that’s not recommended.
- Are SIP returns taxable?
SIP returns below Rs. 1 lakh in a financial year are not taxable.
- What is the minimum duration of SIP investments?
The minimum duration for SIP investment is usually six months.
Disclaimer– Mutual Fund investments are subject to market risks; read all scheme-related documents carefully.