SIP, or a Systematic Investment Plan, is a disciplined way of investing in avenues like Mutual Funds (MFs) and Unit-Linked Insurance Plans (ULIPs). The small amounts invested in a SIP Mutual Fund accumulate over time and help investors build a corpus for their future. Investors do not need to worry about paying the amount each month. They can start the auto-debit facility to get the SIP amount automatically deducted from their bank account. As a result, it helps develop a habit of saving in the long run. Here is a stepwise and detailed guide to investing in SIPs.

• Evaluating Risk Appetite 

  Table of Contents

  Toggle

Before investing, an investor should first understand their risk tolerance. Generally, aged investors with high financial obligations have lower risk tolerance. However, increasing the risk appetite may be necessary if one wants a higher return on their investment. 

• Setting the Investment Objective

After assessing the risk tolerance, one must understand why they want to invest. Savings and investments help people achieve their financial goals, like buying a house or car, going on a vacation, funding a child’s marriage or education, building a retirement corpus, etc. Identifying the investment objective helps get the right combination of debt and equity in the investment portfolio.

• Choosing the Right SIP Mutual Fund

Investors will find various SIP Mutual Fund schemes available in the market. However, selecting one depends on the investor’s risk profile and financial goals. Examining the fund’s performance over the last few years helps make a better choice. Follow these steps after choosing an MF company:

• Fill out an application form
• Fill an online ECS form or submit a cheque offline for the monthly SIP amount. 
• Provide the investor’s identity and address proof, PAN card, etc.
• Submit the KYC form

Choosing the right plan depends on the investor’s financial goals, risk appetite, and expected returns. 

• Deciding on the SIP Duration

One must set a SIP duration that delivers enough returns according to the investor’s goals. A SIP calculator helps calculate returns for different SIP durations, allowing investors to decide on an adequate SIP duration. 

• Selecting the SIP Date

Since the investor will need to pay a particular amount each month on a fixed date, getting it auto-debited from the bank account makes the procedure easier. Therefore, one must choose a specific date for auto-debit, depending on their convenience and cash inflow. 

• Investing Online or Offline

Investors can invest in a SIP mutual fund both online or offline. Investing money online does not require the investor to visit the branch office and manually transfer money into the SIP account each month. However, the best part of online investment is that it allows the auto-debit of money, saving an investor’s time and effort.

SIPs are one of the best mediums to create wealth. Rather than checking the daily prices and market growth every day, stay invested in the fund until the end and reap several benefits they offer.