Over the past decade, SIPs have gained immense popularity among investors. Such has been the impact of SIPs that, these days, even seasoned investors favour breaking up their big financial dreams into smaller and more achievable goals. Here, we will understand the concept of SIPs, when should you start an SIP, and how to start SIP investment.
A quick look at what is an SIP
A Systematic Investment Plan or SIP is an investment option that allows investors to invest small amounts in a mutual fund scheme periodically. It is as simple as regular saving schemes, such as a recurring deposit. For example, an investor can invest a fixed amount as low as Rs. 1000 in a mutual fund scheme at regular intervals – monthly or quarterly. Thus, SIPs free investors from having to commit a large lumpsum amount in one go. Moreover, SIPs also inculcate a sense of financial discipline in the long run. The best part is that investors have the liberty to redeem the investment at any time if there is no lock-in period. If you are looking for a mutual fund scheme to start an SIP, you can consider investing in Bajaj Finserv Flexi Cap Fund. This scheme follows megatrends investing approach that makes it a future-ready investment.
What is an ideal time to start an SIP?
There is no specific ‘best time’ to start an SIP. You can invest in mutual funds any time you are ready. While the uncertainty of the market can lead to potential losses in the short term, the market may normalise in the longer duration. Thus, it is more important for the investors to stay invested for a longer duration than timing the market. This can help them make the most of their investment in mutual funds. Moreover, the earlier you start, the better growth opportunity you could see, as this allows the power of compounding ample time to make your money grow.
Steps to invest in SIP
Step 1: Set up an investment goal
Investment goals assign a purpose to the money you want to invest. With a set goal, you are likelier to stick with your performing investment for a longer time rather than focusing on gains or losses. So, figure out why you want to invest in something and honour your risk appetite. You can also seek to invest in SIP with the help of a distributor or by visiting the fund house’s website.
Step 2: Choose the right mutual fund scheme
Once your goal is clear, research and scrutinise the various mutual fund schemes that align well with your investment objective. You can also seek the advice of a distributor to zero in on the right mutual fund scheme.
Step 3: KYC
As per the guidelines of the Securities and Exchange Board of India (SEBI), KYC verification is mandatory for all kinds of mutual fund investments. The process is quite simple and doesn’t take much time.
Step 4: Fill out the application form
The application form to start a SIP requires certain details like personal data, bank information, investment amount, period etc. It is up to the investor to either fill out an online form or an offline form. Once the details in the form are filled in, the application is further processed.
Step 5: Set up the SIP
An investor can set up the SIP through net banking or via standing instruction to the bank. Here, you must choose the SIP amount, monthly or quarterly debit date, post-dated cheques or auto-debits, SIP duration, etc. Also, make sure that you have sufficient funds available in the bank account on the due date. You can make use of an online SIP calculator to determine your SIP amount.
SIPs are considered a convenient and disciplined approach to investing. They uphold the investment goals and ensure steady, long-term growth. A fixed amount is deducted from your bank periodically and is directed to the mutual fund you choose to invest in. Ideally, there is no specific time to invest in SIPs, but it is recommended to start an SIP early for a longer duration to avail yourself the opportunity of long-term growth. To invest in an SIP, you first need to first figure out an investment goal and then select the right mutual fund scheme. The process to set up an SIP is quite simple – either you can seek the help of a distributor or fill out the online SIP investment application form, select the SIP amount, debit date, or auto-debits, SIP duration etc., do the KYC and monitor the investment on a regular basis.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.