In the current scenario, where there is so much turbulence in the economy and inflation is growing swiftly, a person is advised to diversify their investment portfolio. A Systematic Investment Plan, popularly known as SIP, is one such acquisition that provides exceptional investment possibilities in a time-bound and organized way.
If you are not familiar with the term SIP yet, let this article help you know what is SIP and how to start a SIP online.
What is a SIP?
SIP is a method of investing where a certain sum is put into a specific mutual fund scheme on a particular date for a predetermined period. Once you choose a SIP scheme, a sum will automatically be withdrawn from your bank account, and a certain number of mutual fund units are purchased depending on their price on the investment day.
How Does a SIP Work?
- When you begin a SIP, money is periodically deducted on a set date.
- This money is immediately credited to the mutual fund plan of your choice.
- In exchange, you get a specific number of units from the plan.
- The number of units will depend on the investment amount and the net asset value (NAV) on the allocation date.
- Every month, the same process is carried out.
- This will continue until the SIP expires, you pause the SIP, or the units are redeemed.
- Use the SIP calculator to determine the amount you should invest to achieve your financial goals. Although the calculation isn’t exact, it gives you a rough idea of the investment amount, frequency, and tenure to choose.
How to Start a SIP Online?
If you are wondering how to start a SIP online, you need not worry. Digital platforms have made it possible for people to create SIP accounts online from the convenience of their homes. Here are the steps you must take to start a SIP online:
- First, you need a PAN card, an address confirmation document like a driver’s license, bank statement, or utility bill, a passport-sized photo in JPG or PNG format, and a cheque for the banking details.
- After the paperwork, you can complete the KYC process using any AMC or RTA website with an e-KYC facility. For IPV (In-Person-Verification), a video call is necessary to confirm the relevant data. You must also complete the KYC and FATCA requirements by answering the given online questions.
- After completing the e-KYC, you should click on the “Register Now” or “New Investor” option on the website and generate a User ID and password for online transactions after filling in the required details.
- Next, you must pick the scheme name, decide on the plan, and provide the SIP amount.
- The mode of payment must be chosen once you have determined whether to make a daily, weekly, monthly, or quarterly SIP investment.
- After completing all the required fields, you can submit your online forms to the AMC.
- An acknowledgement is sent through email and SMS by the AMC.
Benefits of a SIP
- Most AMCs allow you to start a monthly SIP with as little as Rs. 500.
- A SIP involves a monthly automated withdrawal from your bank account. This instils the habit of disciplined investment to accomplish financial objectives.
- A SIP may be stopped or put on hold whenever necessary. You can ask the AMC to temporarily halt the SIP if you are experiencing a short-term financial crisis. The SIP might be terminated if the financial crisis lasts longer than anticipated.
- You may gain from the benefits of compounding with a SIP. With a monthly SIP, you would have made significant investments over time and amassed a respectable sum to meet your financial objectives.
Conclusion
SIPs can withstand the volatile nature of the market circumstances and guarantee that you save a sizeable sum for your future via careful planning and prudent investment decision-making. To gain long-term benefits, start investing in mutual funds through a SIP.
