How to Start SIP Investment in India?

SIP Investment in India

Systematic Investment Plan is a method of investing in mutual funds where you regularly contribute a fixed amount. It’s a way to invest small amounts of money on a regular basis. SIPs are great because of their simplicity, flexibility, and ability to help people build wealth slowly and gradually.

But whenever we think of SIPs, the common questions arise: Where do we start, for one? What are these SIPs? 

In this blog, we have explained SIP investment and shown you how to start using SIPs to achieve your financial goals quickly. And so, without keeping you waiting, let’s start.

What is a SIP?

Let’s say you set aside a small amount of money every month, like ₹500 or ₹1000. This money goes towards buying units in your chosen mutual fund scheme. It’s like a small investment you make regularly, and over time, these small amounts add up to a significant sum. That’s how an SIP works.

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Benefits of SIPs

  • Convenience: SIPs are automated. Once you set it up, the investment happens automatically. This eliminates the need to remember to invest every month.
  • Discipline: SIPs inculcate a habit of regular saving and promote financial discipline. You invest a fixed amount, regardless of market fluctuations.
  • Rupee-Cost Averaging: By investing a fixed amount regularly, you purchase more units when the market is low and fewer units when it’s high. This balances out the overall cost per unit over time.
  • Long-Term Wealth Creation: SIPs are best suited for long-term goals. SIPs are intended for a long duration. Consistently investing over a longer time(say 5 years or more), you can gain from compounding.
  • Flexibility: You can choose the amount you invest, the frequency (monthly, quarterly, etc.), and the investment horizon (duration) to suit your financial goals and comfort level.
  • Wide Range of Options: SIPs offer a variety of mutual fund schemes from which to choose. This caters to different risk appetites and financial goals.

Types of SIPs

  • Regular SIP: Invest a fixed amount regularly.
  • Top-up SIP: Gradually increase your investment amount over time.
  • Flexible SIP: Adjust your investment amount based on your needs.
  • Trigger SIP: Invest automatically when the market dips.
  • Perpetual SIP: Keep investing forever (until you stop it).
  • Multi SIP: Invest in multiple mutual funds at once.
  • SIP with Insurance: Combine SIP with life insurance for added protection.

Getting Started with SIPs

Here’s a step-by-step guide to kickstart your SIP journey: Here, you can use GoPocket SIP Calculator to calculate your monthly SIP plans and investments.

Step 1: Gather All the Necessary Documents

You’ll have to provide some papers for KYC (Know Your Customer) verification. It’s a necessary step for all investments. These typically include:

  • PAN Card: This is your Permanent Account Number issued by the Income Tax department. It’s used for tax purposes when investing.
  • Proof of Address: You can just present your Aadhaar, or a utility like electricity or water bill, or any other option like your passport with address updated on it. All of them would work.
  • Bank Account Information: You will require your account number, IFSC code and a canceled cheque for confirmation.

Step 2: KYC Verification

KYC, which stands for Know Your Customer, is a service through which an investment platform verifies who you really are. It’s important because it prevents fraud or money laundering. Usually, you can do KYC on the Internet. The platform will ask you to upload pictures of your ID. Occasionally, they’ll want to video chat or see a selfie to be extra sure.

Step 3: Register for a SIP

There are three main ways to invest in SIPs:

  • Directly with a Mutual Fund House: Visit the asset management firm’s (AMC) webpage that manages the mutual fund scheme that you want to know about. They will provide individuals with an opportunity to carry out registration on their platform, especially those who are new investors.
  • Online Investment Platforms: You can use websites like Zerodha, Groww, and GoPocket to invest in SIPs from different AMCs. These sites are easy to use and offer additional features.
  • Brokers: Traditional brokerage firms can also facilitate SIP investments.

Step 4: Select Your SIP

Now comes the interesting part – choosing the right SIP! Different types of mutual funds are designed to match different goals for investing money and how much risk you’re comfortable with. Here’s what you should think about:

  • Your Financial Goal
  • Investment Horizon
  • Risk Appetite

Step 5: Choose Your Investment Amount and Frequency

Decide how much you can comfortably invest each month or every quarter. Remember, it can start small and gradually increase as your income grows. Choose the investment frequency that suits you best.

Step 6: Choose the Date of Your SIP

Pick a date within your chosen frequency that works best for you. You can also opt for different dates for various SIPs.

Once you’ve selected, you can initiate your SIP online or through a physical form (depending on the platform).

Step 7: Submit your form

After filling out the SIP application form with your chosen investment details, submit the form online or in person. This depends on your fund house or the platform’s process. After verification and processing, your SIP will be set up, and automatic investments will begin on your chosen date. You may also need to set up a debit mandate to automate future SIP installments.

Things to consider before investing in SIP

Consider this few key factors before getting started:

  • Your Goals: What’s the reason you are saving for? Retirement? A dream vacation? Different SIPs are suited for different goals, so having a clear target in mind helps pick the right one.
  • Time Frame: Consider how long you’re okay with leaving your money invested. SIPs work well for goals that are far off, like 5 years or more. The longer you let your money stay in, the more it can grow.
  • Risk Appetite: Investing in equity SIPs may in the long run, help you in making more money, but they pose a risk of your money value falling in value on certain occasions. Debt SIPs are safer, but they might not yield as much extra money in the long run.
  • Investment Amount: Consider how much money you can save each month without getting stressed. Even setting aside a small amount regularly can add up over time. SIPs are all about consistency, so pick an amount you can stick to.
  • Do your research: Don’t just pick any SIP! Look into the mutual fund scheme. Seek its earlier record and interest rate charged.

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Investing in SIPs (Systematic Investment Plans) is a good option for beginners. It’s safer and gives you more choices. SIPs are great for the long term. Moreover, you can withdraw your money whenever you need to.

SIP investing helps you grow your money gradually. Overall, it’s important to stay consistent, keep your money invested, and not get stressed when the market fluctuates.