SIP( Systematic Investment Plan ) The best way to invest in mutual funds

What is SIP?

Systematic Investment Plan, commonly referred to as an SIP, allows you to invest a small sum regularly in your preferred mutual fund scheme. By activating an SIP, a fixed amount is deducted from your bank account every month, which gets invested in the mutual fund of your choice.
Unlike a lump sum investment, you spread your investment over time with an SIP. Therefore, you don’t need to have a large amount of money to get started with your mutual fund investment through SIPs. By investing via an SIP, you are forced to set aside a sum at regular intervals, which help you instil a sense of financial discipline in the long run.

How Does an SIP Work?

Every time you invest in a mutual fund scheme through an SIP, you purchase a certain number of fund units corresponding to the amount you invested. You don’t need to time the markets when investing through an SIP as you benefit from both bullish and bearish market trends.
When the markets are down, you purchase more fund units while you purchase fewer units when the markets are surging. Since NAV of all mutual funds are updated on a daily basis, the cost of purchase may vary from one SIP instalment to another. Over time, the cost of purchase averages out and turns out to be on the lower side. This is known as rupee cost averaging. This benefit is not available when you invest a lump sum.

Why should you invest in SIP Mutual funds?

Poeple should invest in SIP mutual funds because The concept of SIPs is focused on the philosophy of “Save First, Spend Next”.
With an SIP, you can invest small amounts at fixed intervals (weekly, monthly or quarterly) instead of making a one-time investment.
Power of Compounding
The rupee cost averaging results when you stagger your investments over a long period. This ensures that you get much more returns as compared to a lump-sum investment.
Start with as low as Rs 100 a month

You can start investing in mutual funds through an SIP with an amount as low as Rs 500. Over time, you can increase your monthly SIPs when you get the feel of what mutual funds are capable of.
Rupee Cost Averaging
The equity market is volatile, and when you invest via an SIP, you will buy more number of units during a slump and less number of units in a booming market, and as a result, you would decrease the cost per unit in the long run.
Become a disciplined investor
Investing via an SIP would make you disciplined in terms of managing your finances. With the option of automated payments, you don’t have to go through the hassle of investing manually every month.
Acts as an Emergency Fund
You can stop your SIPs at any time, and the fund house has no say in this. Also, you can redeem your investment at any time (if there is no lock-in period).

Who Should Invest Through an SIP?

irst-time mutual fund investors may consider starting their mutual fund journey by initiating an SIP. This is ideal for those having a regular source of income, such as a salary. You can divert a portion of your regular income towards mutual fund investments by initiating an SIP. This helps you instil a sense of financial discipline in the long run as you will be forced to set aside a sum at regular intervals.

SIP or one-time: How should you invest?

One-time investment
In this mode of investment, you make a one time payment of a considerable sum of money.
Monthly SIP
On the other hand, in an SIP, a fixed amount of sum is deposited at regular intervals of time in a mutual fund scheme. In short, one-time investment mode can be chosen if you have money in hand right now that can be invested, and an SIP can be chosen if you are expecting a regular inflow of money in future. First-time investors are advised to take the SIP route.
SIP Investment One-time Investment
Periodic investments in a tenure One-time investment in a tenure (lump sum)
Earns better during market lows Earns better during market highs
SIPs can protect investments from potential market crash One-time investments can lead to major loss during market crash, which happens often enough

How to Choose a Best SIP Mutual funds?

The internet will provide you with the A-Z of the mutual funds you shortlisted including their past returns. However, you have to make sure that the fund you pick meets the below criteria.
Goals
It is important to ensure that you choose to invest in those funds that help you achieve your goals. You have to assess your requirements and match them with the objectives of the fund under consideration before initiating an SIP into it.
Risk tolerance
It is essential that you invest only in those funds whose risk level falls under your risk appetite. If you are a risk-averse investor, then it is important that you invest in those funds that carry minimal to no risk. ₹500 Crore Asset Under Management
A Rs 500 crore asset size can be a reasonable benchmark when selecting a fund. This doesn’t mean that funds below this corpus are bad, but it is not advisable unless you are willing to take some risk.
Duration of SIP
The longer the duration of your SIP, the better. It is advisable to continue your SIP for as long as possible. Even if you don’t invest, you can continue letting your investment stay invested. This way, you give your investment the time to grow to a significant sum
Fund House
The reputation of the fund house is an important factor while choosing a plan as it tells how well they were able to handle market highs and lows without letting their investors feel the impact of fluctuations.

How To Invest in SIP

Set Investment Goals
Every mutual fund is built around an objective to achieve. You have to analyse your requirements and choose that fund which is in sync with your goals and risk profile. If you are finding it difficult to choose the right mutual fund, then let us know your requirements, we will shortlist funds accordingly.
Decide between SIP or lump sum
There are two ways of investing in mutual funds; a lump-sum investment or stagger your investment over time via an SIP. You have to assess your profile and choose to invest either a lump sum or an SIP.
KYC
All our mutual fund investments mandate KYC documentation and a net banking account. Undergoing KYC verification is mandatory as per the norms of the Securities and Exchange Board of India (SEBI), without which you cannot invest in mutual funds, and it is a one-time process. There is usually no need to sign cheques and fill out forms if you are investing in mutual funds with us.

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