A Guide for New Investors on How to Invest in SIP

No matter what your financial situation, a little planning can go a long way in securing your
financial future. If you are in a quandary about not having a hefty amount to put away in a
mutual fund, then SIP might be the ideal investment for you. Mentioned in this post is a step-by-
step guide to invest in SIP.
The appeal of Systematic Investment Plans (SIP) has skyrocketed over the last few years. SIP
is a tool that enables the investor to make periodic investments of as low as 500 rupees in a
mutual fund scheme. Here are the simple steps to invest through a SIP.
Step#1: Decide Your Economic Goals and Capacity
Before you start a SIP, it is imperative to have an idea of the desired target amount at maturity.
If you have life goals to fulfil, plan accordingly to determine the tenure of SIP.
Depending on your monthly income, deduce the amount of money that can go towards your
SIP. Also, assess your risk appetite when investing in SIP.
Step#2: Choose the Right Fund House
Always do meticulous research before choosing your fund house. It is better to see the results
over the last five years or more to understand how a fund house deals with market highs and
lows.
Step#3: Know Your Customer (KYC)
KYC is used by fund houses to gather customer information. The KYC process includes
● Filling KYC Form: The KYC form requires investor details like name, address,
occupation and identity information. The form can be downloaded from the website of
fund houses.

● Attaching Required Documents: A self-attested copy of PAN is a requirement for all

investors. Attach proof of Identity (POI) like a PAN card with photo, Aadhar, Passport,
driving license or ID card with photo issued by certain government bodies, banks, and
colleges. Attach documents for proof of address like a utility bill or a bank statement that
is not more than 3 months old. If originals are not included for verification, send copies
attested by authorised entities.
● Completing In-Person Verification (IPV): IPV can be done by Any SEBI registered
intermediary, or NISM/AMFI certified distributors who are KYD compliant. Financial
institutions now offer an eKYC facility which makes the entire process easy. IPV can
now be done over a video call where you are expected to present your identity proof for
verification.
Make sure to submit the form in only KYC compliant investor service centres or KRA
intermediaries.
Step#4: Select a Fund Scheme Wisely
If you are new to the world of mutual funds, it is best to use the expertise of financial advisors.
On the other hand, if you know your way around how mutual funds work and the possible
 market risks, analyse the different schemes. The risk factor of each scheme can vary, and so
can the returns. Choosing a scheme that works for you is crucial.
For instance, for tax redemption benefits, choose an ELSS SIP. It is a savings scheme linked to
equities with a 3-year lock-in period, but the duration can also be extended. The investments
made in ELSS are eligible for a tax deduction of up to Rs 1,50,000 in a financial year. Similarly,
there are others such as balanced fund, hybrid funds and more.
Learn about the schemes and their benefits before making an investment
Step #5: Go for the Ideal SIP Payment Plan and Duration
The payments can be made monthly, quarterly or yearly depending on your fund house. Choose
the right payment frequency for you. Determine the SIP date based on your salary credit date or
monthly liabilities. Most fund houses offer a choice of dates when the amount will be debited
from your account.
The tenure of SIP can be chosen at the time of investment. It can be perpetual, which means
the end date is not mentioned. If you have a specific duration in mind, choose the number of
years for your investment. The other types of SIP are Top-up SIPs (enables you to increase the
SIP amount periodically), Flexible SIP (gives you the flexibility to increase or decrease the SIP
amount), and lastly, Trigger SIP (lets you set a specific date or event or NAV when the SIP
starts automatically)
Most fund house portals provide SIP calculators and articles on how to invest in SIP. Use the
tools to pick an efficient SIP payment plan.
Starting SIP Online
Thanks to the eKYC facility, initiating a SIP online is a fairly simple process. All necessary forms
and documents can be accessed online. By following the appropriate links to register, new investors
can easily analyse the different schemes and start investing in SIP.