How to invest through SIP?
By Akhil Chugh
Date February 20, 2022
Systematic Investment Plans, called SIPs, help you create wealth over the long term through small and periodic investments. By making small, disciplined savings in mutual fund schemes over a period of time, these plans bring you closer to realising your financial goals.
Simply put, a SIP is a vehicle or an approach to investing a fixed amount in any fund or scheme at regular intervals. By investing across market ups and downs, SIP ensures that the cost of investment averages out over a period of time.
Systematic Investing means:
- Investing a fixed amount
- Investing for a continuous period
- Investing for a defined goal
Now that we have understood what is SIP, let’s understand how to invest in mutual funds via SIP.
How to invest in SIP
Investing in mutual funds via SIP is a seamless process. Just follow these simple steps as listed below to invest in SIP:
1. Know the investment objective and your risk appetite:
For any investment to be successful, understanding your financial goal is key. The goals can vary from retirement planning to child education planning. After carefully defining your financial goal, it is equally imperative to understand your risk tolerance. Knowing your investment goal and risk profile can help you to fetch an ideal portfolio mix of debt and equity.
2. Know the investment horizon:
Investing in SIP is a smart way to achieve your financial goals. Determine the investment horizon needed to reach your different goals and classify them into the below categories:
Short-term goals: Goals with tenure of less than 3 years like international travel, buying a car.
Medium-term goal: Goals with tenure of 3-5 years like buying a house.
Long-term goals: Goals with tenure of more than 5 years like child education planning, retirement planning.
Setting a deadline for your financial goals can help you to choose the right mix of asset allocation and the SIP amount you need to reach the target within the desired time frame. Use the SIP calculator on the Net Brokers app to know the future value of your investments.
3. Choose the right type of mutual fund:
There are a plethora of mutual fund schemes available in the market, the selection of your mutual fund should be aligned with your financial goals, risk appetite, and investment horizon. While picking the fund, you should also take its past performance into account.
Once you have zeroed in on the mutual fund company you wish to invest in, follow these steps to get started:
- To be able to invest in mutual funds via SIP, one must be KYC compliant. You can complete this step easily by filling up a KYC form with details such as name, date of birth, address, email address and mobile number, and submit it with a soft copy of your pan card and address proof.
- If you prefer, you may also complete KYC online with our Net Brokers app through the video KYC facility.
4. Select the SIP details:
Once the KYC is done, as an investor, you have the right to choose a date on which you want the SIP amount to be debited from your account and the frequency of your investment i.e. weekly, monthly, or quarterly SIPs depending on your convenience, goal and time horizon. Usually, it’s advised to choose the SIP date that you get your salary or a regular income on to inculcate financial discipline.
5. Start the SIP online:
Once all the details have been filled and verified, you can kickstart your mutual fund investment journey in a hassle-free and paperless manner through our Net Brokers app. Net Brokers app gives you access to the number of schemes of various AMCs under one umbrella along with various financial calculators like SIP calculator, Retirement calculator to help you pick the right amount of SIP to achieve your desired goals.
How to use the SIP calculator:
A SIP calculator is an easy tool to give potential investors an estimate of returns on their mutual fund investments. It gives you the approximate idea of the maturity amount for any of your monthly SIP, based on your investment horizon and expected annual rate of return (CAGR).
You can use the SIP calculator on the Net Brokers app with a few clicks,
a. Enter the monthly investment amount (SIP)
b. Fill in the number of years you want to stay invested and
c. The expected rate of return on your investment
d. Also, fill in the annual increment if you are opting for a SIP top-up
As soon as you enter all the values, the calculator will give you the estimate of the accumulated wealth at the end of your tenure. Below is the illustration of the same,
Net Brokers Takeaways:
- SIP is a time-tested investment strategy to create wealth in the long run for investors. SIP makes the market timing irrelevant and ensures you stay on the right track for your long-term financial goals.
- Do not expect returns in the short run. SIP can really make the power of compounding work in your favor in the long run. The longer your SIP sustains the more rupee cost averaging works in your favor to reduce your cost and enhance your returns.
- To ensure good returns and the safety of your investments, it is essential to choose the right mutual fund. Contact the expert team of Net Brokers today to guide you in choosing the mutual fund aligned with your financial goal & risk appetite.
- Investors should opt for SIP Top-ups to match their mutual fund investments with their rising income to reach their goals faster.
Once you are all set to take the SIP route for your mutual fund investments, the next part – how to start SIP – is not challenging at all. Remember, the earlier you begin with your SIP investments, the higher the opportunity of potential wealth creation. So, start your SIP today.
Happy investing!