SIP is a preferred choice for many good reasons. And, while most investors have all the good things to say about it, some are still figuring their way to the SIP. Investing in mutual funds through SIP and accumulating exceptional returns from them is easy if you are well aware of your goals, time frame, and risk appetite. When you are sure of what you want to achieve, at what risk, and how much time you are ready to invest, you can easily plan out your SIPs through a SIP calculator and make investments.
Investing in mutual funds through SIP involves three simple steps. Here’s what you need to do.
Step 1: Get your KYC formalities done:
One of the first requirements to invest in mutual funds is to become KYC compliant. Once down, you can invest in any mutual fund scheme through different fund houses.
Documents Requirement: PAN card, address proof, passport size photograph, chequebook.
Offline mode: Investors are required to submit their KYC application form and the documents to any SEBI-registered intermediary center. The application form and documents get shared with the KRA (KYC Rating Agency), which verifies the investor’s details and sends a letter to them in response. The intermediary will call you for in-person verification if you are a new investor.
- Visit the website of the fund house or intermediary (offering an eKYC facility)
- Provide the required details and upload the soft copies of your documents (as asked)
- Now you need to schedule a video call appointment. The purpose of this call is to confirm your identity.
- You will also be required to present your PAN card and other proof.
This process is quite simple, and there is no need for video call verification. However, this mode of KYC restricts you to an investment of Rs 50,000. If you want to increase the limit further, you are required to provide your PAN card.
For Aadhaar-based KYC, all you have to do is.
- Enter your Aadhaar number
- You will get an OTP on your registered mobile number for verification.
- After that, your details will be automatically filled in.
- Then you are good to go.
Step 2: Register yourself for SIP:
For investing in mutual funds, you can choose either a direct investment plan or a regular plan. With a direct investment plan, you can start and invest in SIPs through the mutual fund’s House website. In a regular investment plan, you can invest through a broker or intermediaries like Glide Invest. The benefit of investing with a regular investment plan is you get the assistance of an expert who can help you plan your SIP and make the process easier for you, especially if you are a novice investor.
Steps to follow for SIP registration:
- Visit the fund house or intermediary website, create your account, and set a unique ID and password.
- Login to your registered account and enter the required details.
- Now provide details of the bank from which the SIP amount will get debited.
- Once you receive confirmation from the find house, you are ready for investment.
Step 3: Choose the right SIP for your needs:
The right SIP is the one that is carefully selected based on your income & expenses, financial goals, and the amount you would be comfortable investing periodically.
Before starting with your SIP investments, it’s also important to be aware of various SIP available for investors so you can easily distinguish them and choose the one based on your requirements and preference.
- Regular SIP: With this SIP, investors invest a fixed amount at fixed intervals. However, investors cannot change the decided amount until tenure. The SIP frequencies are usually monthly, bimonthly, quarterly and half-yearly.
- Step Up or top-up SIP: These SIPs allow investors to increase their SIPs periodically. Such a provision offers investors more flexibility, allowing them to create wealth faster through compounding. Various step-up calculators are available that allow investors to calculate their step value and plan their investments.
- Flexible SIP: As the name implies, these SIP enables investors to change their investment amount according to their financial conditions. For this, investors need to inform the fund house one week before their SIP installment deduction date.
- Perpetual SIP: It is for those who don’t want to bind themselves with tenure and stay invested as long as they wish to. This SIP continues till the investor instructs to stop the investments.
- Trigger SIP: It is for inventors who understand the market dynamics and know how to drive their investments around it. Through trigger SIPs, investors can start, redeem or switch the SIP as per market conditions.
So, how much should you invest?
Well, the answer you are likely going to find is your financial goals. It may be buying a car or going on vacation etc.). You can use a SIP calculator to find out how much you are required to invest monthly to reach that goal.
When should you start investing?
Whenever you wish to, you can. Go through your bank statements to check when your salary and other incomes are credited to you and set your SIP installment date accordingly.
What funds should you choose for SIP?
As an investor, you should prefer the funds based on your risk profile and goals. If you have a high-risk tolerance capacity, equity funds are a great option to generate exceptional returns. Those with less risk tolerance can opt for debt or balanced funds. Analyzing the past performance of a fund scheme is integral to making the right choice regarding fund selection.
Use a SIP calculator to analyze your growth even before you start investing.
A SIP calculator is an easy-to-use tool that helps investors keep a tab on their investments without getting into complex calculations. The SIP calculator gives a rough estimation of returns to investors for their SIP investments. The results also show how their investment will grow based on the investor’s time horizon and the fund’s annual rate of return, helping them plan their investments in a better way.