With a Systematic Investment Plan (SIP), one can start investing in mutual funds with as little as Rs. 1,000/month. Check out this post to know how you can start your first mutual fund SIP.
Apart from the different types of mutual fund schemes to suit every investor, another significant benefit of mutual funds is the Systematic Investment Plan (SIP). You can either invest a lump sum amount or start a SIP in the scheme of your choice. The SIP option enables you to start investing in mutual funds with just Rs. 1,000 per month.
This makes it an excellent choice for people who are young and have limited disposable income to make a lump sum investment. The SIP option is also preferred by several seasoned investors wanting to diversify their portfolios.
But for someone new to mutual funds, understanding how to invest in SIP can be challenging. To help make things easier, here are the detailed steps you should follow.
To begin with, you will first have to visit the official website of the fund house whose mutual fund scheme you are interested in. Once on the website, you will have to look for the 'New User Registration' option. This will redirect you to a new page where you must provide your basic details, along with PAN and bank details.
If this is the first time that you are investing, you must complete eKYC (Electronic Know Your Customer). This is an Aadhar based identification verification process. It is a simple process that should not take more than a few minutes. But note that the verification could take 3-4 working days.
Once the eKYC is done, the fund house will create a new user account for you. You will receive your username for logging into their online portal through email. You can then set your password for the account.
After completing the initial setup, log in to your mutual fund account and search for the scheme you want to invest in. Select the scheme, and you can find detailed information about the same, including the AUM, expense ratio, exit load, and minimum SIP amount. Look for the 'Start SIP' option to set up your SIP.
You will then be required to enter details like your SIP amount, monthly debit date, and SIP duration. After providing these details, you will have to set up the monthly SIP payment. You can either give Post-Dated Cheques (PDCs) or fill the NACH for auto-debit.
To submit PDCs, you will have to visit the nearest branch of your fund house personally. Most investors now prefer NACH for automatic SIP debit from their bank account.
If you are looking for how to start SIP online, you should also know about what NACH is. In the past, SIP investments required ECS (Electronic Clearing Service) mandate. But from 2016, this has been replaced with NACH (National Automated Clearing House). When you invest through SIP, the fund house can automatically debit the SIP amount from your bank account on the selected date. The amount will then be used by the fund house to purchase units of the chosen scheme.
But to make this possible, you are required to give a standing instruction for auto-debit to your bank. The NACH form makes this possible. You can download the NACH form from the official website of your AMC. You will then have to take a print out and fill out the form before posting it to the fund house or uploading its scanned copy online.
Also, apart from mutual fund SIP, NACH registration is eligible for utility bills, credit card payments, and insurance premiums.
The last step in how to invest in SIP online is making your first SIP payment. NACH registration can take 10-15 working days. Once you submit the NACH form with your signature and other details, your fund house will send the form to your bank. The bank will then forward it to the NPCI (National Payment Corporation of India) for verification.
If the verification is successful, the NPCI will inform the same to your bank, which will then pass the confirmation to your fund house. Your fund house will now be able to debit the SIP amount from your bank account, eliminating the need for you to make the payment every month manually.
Once your SIP is started, you can then log in to your account and monitor your portfolio. You also get the option to increase or decrease the SIP amount, switch to a different scheme, or withdraw your investment.
Now that you have the detailed steps on how to start SIP investment, it shouldn't be difficult for you to begin your investment journey. But before initiating the process, give special attention to the fund house and the mutual fund scheme you select. Your investment profile is of the utmost importance when making an investment decision.
Also, be very careful with the SIP amount you select. Go for an amount that you can easily invest every month until the end of your SIP duration. Only then will you be able to get closer to your investment objective.