A beginner's guide on What is SIP and how to invest in SIPs

Economics 15 May 2021 1:40:PM

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Normally when we asked for an investment in mutual funds for the long term, we heard from everyone who does SIP. As a layman, the first question that comes to mind is What is SIP? 

What is SIP?

SIP stands for Systematic Investment Plan. It works the same way as Recurring Deposit (RD) works. It allows you to invest in Fixed Amounts on a fixed day for a fixed period of time. The biggest advantage you get is the benefits of market volatility in the longer tenure.

How to invest in SIP?

How to start a SIP Investment?

  • Now due to technology increasing, the process becomes simpler for you as an investor. As an investor, you have to follow the below steps
  • All holders KYC should be registered
  • Nowadays everyone prefers to do online, so you have to register yourself with a distributor or advisor for doing transaction
  • You have to register a bank mandate by which a fixed amount will be debited and it will go to selected funds 
  • After both registrations, you can do any mutual fund for any period for any amount up to the mandate given by you.

The above process helps the investor to start SIP investment.

Which SIP is best to invest in?

Normally SIP should be done for goal-based and risk-based. This can be explained by below example:

If you are planning for a born baby's higher education as a goal then the SIP should be done in the equity segment as the goal is long tenure and equity as an asset class has the ability to deliver a better return than most of the other asset classes.

Hence as a new investor, you have to see the goal and according select the fund for investment. Normally advisors do goal-based SIP investment those will be better to consider for this.

SIP Amount modification:

Do you have a question like can I change my SIP amount? so, the SIP amount can be modified system-based as well as manually also. System-based are called as Top-up SIP or Variable SIP where system modified the amount as per defined parameter by you and increased yearly SIP by specified % or amount on every year. 

Manual Modification: Since money is a limited commodity and hence you required flexibility to moderate the amount. There are modification options as well as cancellation options available for SIP by which you can change the SIP amount.

Contact us now to make your first SIP investment and click here to explore other investment opportunities. 

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