Starting a new form of investment comes with many thoughts and worries. Do you know enough about the plan? Is it suitable for your lifestyle and goals? How much risk is involved? These and many other questions will plague you, and rightly so. The smart thing is to get acquainted with the fundamentals before making the leap.
If you’re planning to start a systematic investment plan (SIP), you’ve come to the right place! We’ll help you with the fundamental knowledge you need before starting an SIP investment. Let’s begin with the basics!
What is an SIP?
SIP is a form of mutual fund investment that lets you deposit a specific amount of money at predetermined intervals into a fund. You can choose to invest monthly, quarterly, and so on into the fund of your choice.
SIPs are great for beginners and people who cannot make lumpsum investments. Apart from being financially friendly, it also fosters the habit of regular investments and savings. Some of its benefits are:
- Power of compounding to grow your wealth by reinvesting your profits
- Rupee cost averaging to reduce the cost of investment over time
- Flexibility in SIP schemes
- Low minimum investment amount
- Diversified portfolio for better risk management
- Easy on the pocket
- Aligns easily with financial goals
- Effective long-term investment option
To get the best out of your SIP, you must make personalised decisions. Here’s how.
Things to Consider Before Investing
While an SIP is suitable for most, if not all, investors, there are a few factors that may change how and where you should invest. Hence, you should keep the following things in mind:
- Determine your investment horizon (time period during which you’ll invest) and financial goals. Align them.
- Know your risk appetite and pick plans accordingly.
- Seek advice from a financial expert if you need it. There’s no harm in being extra sure of your decision.
- Definitely use an SIP calculator. They are free, online tools that calculate accurate estimated return on your investment.
- Check the terms and conditions, minimum investment amount, and historical performance of the funds.
- Factor in your financial milestones, impending expenses, and other customised factors before choosing an investment plan.
- Invest consistently and gradually increase the investment amount over time to get maximised returns.
Once you’re all set with the fundamentals, the only thing left to do is start investing.
How to Invest in an SIP
It’s pretty simple to invest in an SIP in India.
Get your KYC done on a fund website or online portal. For that, you need to provide basic details like a PAN card, address proof, chequebook, and photographs.
Complete in-person verification or submit your Aadhaar card.
Choose the SIP to invest in.
Register for the SIP. To do so, you can visit the mutual fund website and create an investor account. Then, fill out the application form by providing personal details and contact information. Next, create your user ID and password, and add bank account details for SIP debits.
On confirmation from the fund house, your account will be set up and you’ll be ready to invest.
Conclusion
SIPs are a great choice to grow your money and build wealth steadily. However, you must select the right fund for maximised returns. Start investing early to harness compounded profits and secure your financial future with minimal risks. Click here to start your SIP investment journey
