Introduction

Investing in mutual funds might be a blissful experience when you know how to start SIP investment. SIP or Systematic Investment Plan is a low-risk way of earning money from the capital or secondary markets. You can benefit from rupee cost averaging to bring down your net investment cost. And the power of compounding enables faster capital growth. There are 4.3 crore SIP accounts in India, and the number is growing at a breakneck speed, with 20 lakh new accounts being opened in August 2021.

Keep reading to discover the five straightforward steps to start your first SIP investment. 

How to Start SIP Investment - A Primer

SIP investment is the easiest way to make money from the capital or secondary markets. You do not need to sift through volumes of data to find the best stocks and spend anxious nights tracking news. You also do not need to analyse the global bond yields, interest rate movements, or macroeconomic events. When you invest in mutual funds, trained financial experts do the analysis for you. All you need to do is know how to start SIP investment, and you are good to make profits.

With SIP, the challenging part is not making money but finding the best scheme to invest in. The forty-four (44) Asset Management Companies (AMCs) in India collectively manage over 2,500 mutual fund schemes. So, finding the best scheme might be easier said than done, a reason why you need to adopt a systematic approach.

The following sections elaborate on the five sorted steps to start your first SIP investment successfully.

How to Start SIP Investment - The Five-Step Process

Step-1: Set a Financial Goal

Saving without a clearly set goal is no saving at all. You will need to fulfil several obligations at different stages of your life, such as house purchase or renovation, children’s education, wedding or other events, retirement, and whatnot. 

Intelligent investors always calculate the cost of fulfilling their future financial obligations before investing in mutual funds. Remember to factor in inflation while calculating your financial obligation. 

Once you figure out the financial goal, you can estimate the amount you must save every month. For example, if you want to sponsor a wedding for INR 20 lac after ten years, you need to save at least INR 10,000 every month, assuming the interest rate remains a steady 10%.

Step-2: Evaluate Your Risk Profile

Evaluating your risk profile is crucial to invest with confidence. Once you analyse your risk appetite efficiently, you can tackle the market risks better. For instance, if you consider yourself an aggressive investor, equity funds may suit you more. But, conservative investors usually prefer investing in debt funds since the secondary market is less volatile than the capital market. 

While gauging your risk profile, remember the golden rule – the older you get, the higher will be your financial liability and lower your risk appetite. 

Hence, if you want to grow a significant corpus, start investing early. Starting early enables you to make compounding your friend. 

Let’s now move to the third step on our journey to learning how to start SIP investment.  

Step-3: Select The Best Mutual Fund Scheme

As previously mentioned, finding the best mutual fund scheme among 2,500 schemes might be tricky. Generally, investors rely on the following two methods to screen and pick the best mutual fund. 

Method-1: Visit the official website of 44 AMCs and browse all mutual fund schemes offered by them. AMCs generally display their best-performing funds on the landing page. However, scanning all AMCs might be time-consuming, a reason why investors mostly choose the second method.

Method-2: Visit the website of a reputed broker like 5paisa. 5paisa scans thousands of open-for-subscription mutual funds to display the best. When such convenience is at your fingertips, finding the best mutual fund is as easy as 1-2-3. 

 

Step-4: Decide the SIP Payment Date and Time 

The best thing about SIP is that it lets you invest the same amount every month without thinking about the payment. You may set up an auto-payment, and the amount will get automatically deducted from your account every month. 

However, it is necessary to set the date and time properly. Select the date after analysing your income pattern. If you are a salaried professional who gets their salary on the 1st of every month, you may select a date after that. This would ensure a seamless transfer of the amount from your account.   

Step-5: Open The SIP Account

We have now arrived at the final stage of the five-step ‘how to start SIP investment’ process. Incidentally, this step is the easiest.

Brokers like 5paisa make your journey super smooth. You can enter your mobile number to get a callback from a mutual fund officer who will guide you through the process to open an account. 

Generally, the mutual fund officer will ask you to furnish your PAN card, Aadhar card, bank statement, and a photograph. If you open the SIP account online, you have to sign the document digitally. But, if you open it offline, you have to sign the document brought to you by the broker’s agent. 

We have now arrived at the final stage of the five-step ‘how to start SIP investment’ process. Incidentally, this step is the easiest.

Brokers like 5paisa make your journey super smooth. You can enter your mobile number to get a callback from a mutual fund officer who will guide you through the process to open an account. 

Generally, the mutual fund officer will ask you to furnish your PAN card, Aadhar card, bank statement, and a photograph. If you open the SIP account online, you have to sign the document digitally. But, if you open it offline, you have to sign the document brought to you by the broker’s agent. 

Start Your SIP Investment Early To Fulfill Your Financial Goals 

Now that you know how to start SIP investment, it’s time to take it one step further. Visit 5paisa to browse the top funds designed to fulfil specific financial goals and become an investor within five minutes.

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