How to Start a SIP Investment?

5paisa Research Team Date: 21 Feb, 2023 12:53 PM IST


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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.

Watch How to Invest in SIPs?


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

What is SIP?

Systematic Investing Plan (SIP) is an investment strategy in which an individual can choose to invest systematically over time. To achieve his investing goals, he may establish a corpus. SIP is thus not distinct from mutual funds, but rather a necessary component of them.

SIP encourages discipline in mutual fund investing. This is accomplished by the investor depositing a regular fixed amount in the selected plan over a period of time via a SIP. The investor here has the option of selecting the frequency of investments, which can be daily, weekly, monthly, or yearly. Typically, the aforementioned routine is meticulously followed. When using SIP, most inventors pick an auto-debit feature to preserve the efficiency of the investment.

SIP investing is the most straightforward technique to profit from the capital or secondary markets. You don't have to trawl through mountains of data to locate the greatest stocks or spend sleepless hours monitoring news. You are also not required to examine global bond yields, interest rate changes, or macroeconomic developments. When you buy mutual funds, professional financial specialists perform the analysis on your behalf. All you need to know is how to start SIP investment and you're ready to benefit.

How to Start SIP Online?

As more digital platforms have emerged, investors may now find it simpler to register a SIP account online than they would through the more conventional method of filling out an application form. In fact, from the comfort of your home, you may register a SIP account online. Please be aware that KYC is a necessary prerequisite for opening SIP online. Your address proof, PAN card, and other documents are requirements for KYC compliance. 
The steps one must take before investing in SIP are as follows:

1. Identify Your Financial Objectives

Your financial aim, which you want to accomplish with your money, might be referred to as your investing goals. Investing for retirement, setting up an emergency fund, or just setting aside money for a significant purchase like a house or car can all fall under this category. This is the first step that you must consider before contemplating to invest in mutual funds through SIP

2. Know your Appetite for Risk.

Knowing your level of risk tolerance is crucial before you begin investing in a systematic investment strategy. Based on your investing objectives and risk tolerance, this is the monthly sum of money you are willing to risk.

3. Use the SIP Calculator to Calculate

A SIP calculator may help us determine how much money we should put into investments each month depending on our goal portfolio size if we are aware of our risk tolerance. The SIP calculator determines how much money has to be invested each month for each year left before retirement by taking into consideration both the initial deposit amount and the number of years until retirement.The nicest feature of using this calculator is being able to see exactly how long it will take for your investments to start paying off by showing both monthly payments and returns over time.

4. Take Financial Guidance

It's crucial to get financial counsel before making an investment in a systematic investing plan. You may select the ideal investment funds for your needs with the assistance of several financial advisors. You might also think about speaking with a local accountant or financial counselor about your goals and whether a systematic investing strategy would be suitable for you.

Following are the steps that you shall need to take to invest in mutual funds through SIP:

1. Assemble the Relevant Paperwork: The investor needs a passport-size photo in jpg or PNG format, a PAN card, proof of address in the form of a driver's license, bank statement, or utility bill, and a check for the bank information.

2. Becoming KYC compliant: Once the paperwork is prepared, the investor can complete the KYC process using any AMC or RTA website that has an e-KYC capability. Online KYC is referred to as eKYC. The investor must submit basic information for e-KYC, including name, date of birth, mobile number, and address, as well as upload a copy of their address proof, PAN, identification proof, and passport-size photo online.

3. Sign Up For an SIP: In order to begin investing in a systematic investment plan (SIP), you must first register with the Indian broker or financial advisor you desire to engage with. After registering, you may select from a variety of investing programs to match your requirements and risk tolerance.

4. Select the Best Strategy for You: The most crucial step is this one. It will be tough to achieve a solid return on your investment if you don't pick the correct plan. Each plan is unique and will have unique characteristics and advantages.

5. Select the Amount You Wish to Invest: Decide how much money you wish to put into the plan. It's critical to decide how much you want to invest each month or each week. This will depend on how frequently you will require money and how much it will be worth overall.

6. Submit Your Form: By submitting the form online or offline, you may begin the SIP
If you have a demat account online, you may submit your SIP online. You can also submit it physically by going to post offices or your bank.

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 fulfill specific financial goals and become an investor within five minutes.

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