How to Invest in Systematic Investment Plan (SIP) in India

A Systematic Investment Plan or SIP is an investment method that allows you to invest a fixed amount of money in regular instalments. You can choose the frequency of investments as per convenience. Once you start a SIP, the pre-fixed amount will be deducted from your account.

How to invest in SIP?

Here are the steps you can follow to invest in SIP:

How to invest in SIPs | SIP Investment | Advantages of investing in SIPs | ICICI Direct

Step1: Pick a mutual fund scheme

Start by making a list of your goals. Long-term, short-term, and mid-term goals require different investment strategies. Your risk appetite will also dictate your choice of a suitable mutual fund scheme. For instance, equity mutual funds are high-risk funds. Alternatively, debt mutual funds are ideal for low-risk appetites. You can pick an appropriate mutual fund scheme based on your goals and risk appetite and start the SIP.

Step 2: Complete your KYC verification

You must finish your KYC verification to invest in SIP. For this, you will need your Aadhaar card. You can complete online KYC on the fund house's website or a KYC registration agency via two methods: Aadhaar OTP and Aadhaar-based Biometric Authentication. You can also opt for offline KYC.

You need to submit identity proofs like PAN Card, Voter ID Card, Passport, or Driving License. In addition, address proofs like your bank account statements or the passbook of the last three months, utility bills of the previous three months, etc., are also required. Once your KYC is complete, you can proceed to invest in SIP.

Step 3: Register for the SIP

Visit the fund house's website of the selected mutual fund scheme and register as a new investor. You will be asked to fill the application form and enter your personal and contact details. You must choose a user ID and password for yourself too. Finally, enter your bank account details from which the SIP will be automatically deducted. Select the amount and frequency of your SIP, such as monthly, quarterly, etc. Once you have set up the SIP, you will get a confirmation from the fund house.

Why are SIPs essential?

SIPs have simplified investing. They offer you a host of advantages that makes them a viable investment method. Here's why they are essential:

Low investments

You can start a SIP for a minimum amount of only Rs. 500. SIPs make investing accessible to you, no matter your income, age, or risk appetite.

Power of compounding

With SIPs, you can benefit from the power of compounding over a long investment term. Small investments can garner significant returns over time, offering you growth without the burden of investing in high sums at once.

Convenient

Once you are done with the KYC process and selected a SIP of your choice, you do not have to do anything. The money goes from your account as per your chosen preferences.

Rupee cost averaging

Rupee cost averaging helps you beat market fluctuations. When the market is down, you buy more units, and when the demand is high, you end up buying fewer units. The risk is averaged out, and you escape volatility.

Financial discipline

When you invest in SIP, you inculcate financial discipline that helps you in several ways in life. You get to save and build wealth more systematically and ultimately achieve your goals without tracking the market actively.

Conclusion

A Systematic Investment Plan is a great way to build wealth with small contributions. It also reduces the fear of investing that is often associated with lump sum investments. Now that you know how to invest in SIP, you can go ahead and pick a mutual fund scheme that aligns with your requirements.