Investing is one of the most crucial decisions you make for your future. It is not just about creating wealth; it helps beat inflation and sets a foundation for your long-term financial goals.
However, investing is not a one-time decision where you put money in a scheme and wait for returns. It takes regularity and consistency to reach successful outcomes. This can often be difficult, particularly in times when people have busy schedules and have to manage their work, family, and personal responsibilities together. That’s where SIP comes in as a useful investment strategy.
An SIP helps you invest small amounts regularly rather than committing to a lump sum amount all at once. This strategy brings regularity and discipline to your investments and helps you build a long-term portfolio with small contributions.
Here is a guide to invest in systematic investment plans, highlighting how SIP works, its benefits, and tips to invest wisely.
Step 1: Decide the type of SIP fund, amount, tenure
Ask yourself, what are you saving for? A down payment on a house, retirement, or your child’s education? Next, choose from equity funds, debt funds, hybrid funds, gold mutual funds or other options as per your goals and risk tolerance. Now decide how much you want to invest and for how long. You can use an SIP calculator to make these determinations.
With an SIP calculator, you can easily calculate your potential returns based on different tenures, interest rates, and amount. With the information, you can tweak your investment strategy and create a plan to achieve your goals faster.
Step 2: Invest in an SIP
You can invest in SIP plans through the website of your bank or brokerage firm and mutual fund investment apps. Usually, the steps involved are almost similar, with only slight variations in the terms used.
- Visit the fund house website
Register yourself on the platform and create an account. You will have to verify your KYC details by linking your Aadhaar, PAN, and bank account. After that, you will get a User ID and Password for your login.
- Evaluate and compare different mutual funds for SIPs
Login to your account and explore various mutual funds to identify the right scheme. Also, go through scheme-related documents to understand the fund’s objective, past performance, cost structure, exit load, applicable NAV, fund manager’s profile, etc. This step can help you choose an SIP mutual fund that aligns with your goals, risk appetite, and investment horizon.
Fill out the application form with your personal and bank account details from which your SIP amount will be deducted. You can choose the amount, frequency, and duration as per your convenience, requirements, and financial capacity. Cross-check all the details and read the terms and conditions carefully. Now confirm the transaction after which your SIP will be initiated.
Tips to invest in SIP plans wisely
While SIP investments have various benefits, a well thought out approach can help you make the most out of it.
- Always link your SIP to a specific goal to get more clarity on fund allocation.
- Once you start an SIP, it is best to continue it without any interruptions. This ensures you fully benefit from the power of compounding.
- Evaluate your SIP based on long-term outcomes and avoid short-term evaluations as they can lead to wrong or impulsive decisions.
- With every increment or improvement in your finances, it’s wise to step up your SIP and increase contributions.
Most importantly, consult a financial advisor who can help you set realistic goals, invest as per market trends, and create a customised strategy.