A Systematic Investment Plan (SIP) is a disciplined approach to investing in mutual funds wherein you decide to invest a fixed amount for a fixed period and with equal duration. It allows you to choose the amount to be invested and the frequency of the investment from daily, weekly, monthly, or quarterly.
HOW TO CHOOSE AN SIP INVESTMENT PLAN?
Keep the following factors in your mind while investing:
1)The objective of the Investment
It depends on your objective which SIP plan will suit your needs. E.g. If you are investing for a long-term goal, say of a plan that has a time gap of 10 years, then you can invest through SIP into an equity-oriented fund. In other words, the selection of a suitable scheme depends on when your financial goal is due (short term, medium-term, or long term). Invest in debt-oriented funds for short-term goals, hybrid funds for medium-term goals, and equity-oriented funds for long term objectives. The reason behind investing in debt is that it offers capital protection with reasonable returns. On the other hand, equity offers the potential of attractive returns over the long term.
2) Investment horizon
SIPs are a great investment for the achievement of your goals based on their tenure – short, medium, or long term. For different goals, there are different mutual funds through SIPs. E.g. If you want money in a short span, you could start SIP into a short-term debt fund.
3) Risk Appetite
Make a crucial decision on Risk appetite. It helps you to choose the asset class of your SIP scheme. E.g. if you as an investor can afford to take more risk, then go for a pure equity fund. For an investor who is willing to take a low or moderate risk, debt funds or hybrid funds would be a good choice.
4) Asset Allocation
It is necessary to diversify your investments across different asset classes. Investments in SIPS should be made in a combination of equity-oriented and debt-oriented funds or hybrid funds with the asset allocation based on your risk appetite.
5) Value of your Goal
Always calculate the amount you want to collect to reach a particular goal before starting SIP.
Different and Simple ways to invest in SIPS
Offline mode
A form has to be filled by the investor that can be obtained from the fund house or they have an option to download them from the fund website. An auto-debit National Automated Clearing House (NACH) mandate has to be filled. A copy of a canceled cheque would also be required along with KYC documents – address and ID proof.
Online mode
To invest online in SIP is a hassle-free and paperless manner. People can start a SIP online either through the Mutual Fund distributor or through the Asset Management Companies. However, one must always prefer to invest through distributors as you may find several schemes of various Asset Management Companies under one roof. Also, these distributors do not charge any fees from the clients and provide an in-depth analysis of various schemes. Moreover, e-KYC can be done using the facility provided by these distributors.
To discuss the online facilities:
Fund house website: By entering the personal details, SIP, and bank details in the I-SIP facility from the fund house website, a SIP can be set up. A URN will be generated on submission. Now, the investor will have to log in to his/her bank account and enter the mutual fund as a ‘biller’. The URN is necessary to enable SIP instruction.
Distributor portals: corporate distributors or banks which are Mutual fund distributors provide portals for online transactions of mutual funds. Investment through SIPs can be easily set up using these portals.
MF transaction portals: Registrars of fund houses or the MFU (Mutual Fund Utilities) platforms host various portals Mutual funds.
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