All You Need To Know About SIP Investment

With lower interest rates of conventional investment options such as fixed deposits, recurring deposits, insurance plans, etc., investment in shares and mutual funds is becoming popular nowadays. Mutual funds are even more preferred since it allows you to invest periodically in small denominations.You may choose to invest weekly, quarterly, or monthly. Since the market keeps on fluctuating, a mutual fund is known to handle the vulnerability better as it invests in diversified stocks, compared to investing a large sum in a single stock. Let’s look at the common queries and doubts that people face while investing in mutual funds through SIPs.

With a Systematic Investment Plan (SIP) , you can choose to invest any specific amount every month with the mutual fund of your choice. You may choose an automated debit from your bank account for each month on a specified date. This helps to invest consistently in a disciplined manner. With this monthly investment, you are allotted a number of units as per the current NAV rates.For example, let’s say that you choose to invest 2000 Rs. each month towards a specified SIP scheme. This amount of 2000 Rs will automatically be debited from your account every month to purchase units. If the current NAV stands at Rs 50, you will be allotted 40 units for that month. With changing NAV, the values of your holdings change accordingly. If the NAV jumps to Rs. 100 next month, you will now only get 20 units. This feature also helps you take advantage of rupee cost averaging, ensuring you buy lesser units when the prices are low and more units when the price is less.You just need to do good research before opting for any particular SIP by looking at their past performances. You may also contact financial service firms or your bank’s relationship manager for guidance on various available SIPs. Also, you may choose to start your SIP online, which is quite an easy process.

It is always important to have an objective in mind while investing with SIPs such as for a child’s education, retirement, marriage, etc. The goals can be short-term, medium-term, or long-term, but it must be specific and attainable in nature. Goals help you to choose relevant SIPs and prevent you from getting impatient with temporary market fluctuations. For selecting the suitable SIPs to meet your financial goals, you can use SIP calculators to identify the amount of SIP you need to make every month to meet your goal.

As for the SIPs, there is not a single right amount for everyone. It largely depends on your risk appetite, duration of investment, and the financial goals of an individual. The beauty of SIP is that you can start investing in it with as little as Rs 500 per month.One thing to be kept in mind while investing in SIPs is that capital market fluctuations are common over a period of time. Exiting from the current fund when the market is low and going for another fund may not turn out profitable for you. Hence, one must not be impatient when the market is low, and the investment must be considered long term. With a longer duration, the market tends to even out, and there are chances of higher returns than in shorter duration.

It is really important to do detailed research before zeroing onto any particular SIP. You can learn about the top performing SIPs within clicks, but make sure to analyse them as per your requirements and financial goals carefully. It is also crucial to look into each fund’s performance in the last few years.

Follow the below steps while investing in SIPs:

• Submit the application form along with a copy of the address proof, PAN card, and a passport size photo.
• Also, you need to submit a cheque for monthly SIP amount, if applying in offline mode.
• Fill up the ECS form, if applying in online mode.
• Submit the KYC form.

1. Step 1: Analyze Your Risk Tolerance and Identify the Investment Objective There are certain factors that can affect your risk tolerance, such as your age and financial obligations. Also, identify the goal of your investment, such as a child’s education, retirement plan, buying a house or marriage, etc. These factors will help you to build your portfolio by getting the right mix of equities and debts.
2. Step 2: Pick the Suitable SIP/Mutual Fund Scheme There are varieties of SIP schemes available in the market. Make sure to pick one with good past performance and also matches your risk appetite and financial goals. Selecting the right fund is crucial to meet your financial objectives.
3. Step 3: Decide Upon the Date of Investment for Each Month, the Total Duration of SIP and Whether You Wishto Invest Online or Offline You need to decide upon a particular date on which you wish to deposit the SIP instalment each month. This may be auto-debited from your bank or can be submitted through check. Also, you need to figure out the duration for which you would like to invest in the selected SIP. The investment date for each month and total duration has to be mentioned while applying for SIP .
4. Step 4: Apply for Starting the SIP After you have decided upon the points mentioned above, you need to apply for the SIP that can be easily done both online and offline. You need to physically submit the application form and other documents in offline mode, whereas it can be done through a computer system in the online mode. Below submissions are required while applying for it:
5. Make sure to double-check all the details before submission to avoid any issues later.
6. Step 5: Stay Invested for the Entire Duration SIP investment is one of the best ways to meet your long-term financial planning goals. You do not need to worry about everyday fluctuations of the market and must wait till the SIP matures, to avail the actual benefits. You must remain invested to make the most of your SIP.

You can easily start an online investment in SIP in three simple steps:

• Arrange for all the necessary documents, including PAN card, address proof, passport size photo, etc.
• Get your KYC done online by submitting the required details and soft copies of your PAN card and address proof. This can be done through the financial services website that you have chosen.
• After the KYC, you can register for starting the SIP through the website of your financial services provider. You will be able to create your login for carrying out the transactions online, smoothly.

The best part of SIPs is that you do not need to invest a large sum at one go. It can also even out the market fluctuations in the long run, and hence you can be prepared for financial obligation due in the coming times.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.