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A Quick Guide to Systematic Investment Plans

Unsure about where to invest, such that you meet your long term financial goals? Here’s something you might find interesting. According to the Association of Mutual Funds in India, as of May 2018, the total number of Mutual Fund Systematic Investment Plan accounts totaled a whopping 2.23 crore, amounting to an astonishing ₹7,304 crore in investments. What is even more interesting is that an August 2017 article on The Economic Times stated that Google searches for such plans had touched a 5-year high, especially from states like Jharkhand, Sikkim and Haryana, which traditionally record low assets under management as a percentage of the state’s GDP.

In fact, The Economic Times expects investments in SIPs to grow going forward, given that these plans offer a convenient and lower risk way to invest in equities with investments as low as ₹500 a month. Here’s a look at some simple steps to get you started on systematic investments.

1.  Select the Mutual Fund

To start with, research well to find a mutual fund that satiates your risk appetite as well as your financial goals. There are 3 types of mutual funds to choose from, debt funds, equity funds and hybrid, of which debt funds entail the least risk. Equity funds are long term mutual funds with market-based returns, which makes them better options for people with higher risk tolerance. Debt-based mutual funds are short term funds with slightly higher returns than banks, while hybrid funds help with extreme conditions, such as market correction, to minimize losses for investors. Their returns, however, depend on market volatility.

2.  Open an Account

After you have chosen the SIP that best suits your needs, create an account on the provider’s website. In case you already have an account with the fund provider, simply login to your account. After this, you will need to click on the option to invest in a fund, while also choosing the fund that you prefer.

3.  Complete the KYC

KYC (Know Your Client) is an integral part of our financial system. To complete your registration for an SIP, you will need to provide some key documents, such as identity proof, address proof and photographs. You will also need to submit a copy of your PAN card. It is best to check the company’s website for the complete list of documents required. You can also opt for eKYC, wherein you will simply need to upload scanned copies of the documents, without having to visit a physical branch office.

4.  Payment

Once the KYC has been completed, you will need to select the payment mode you prefer. You can choose whether to make a lump-sum investment or pay smaller amounts at regular intervals. You can also choose whether the payment can be directly deducted from your bank account.

The best part is that you don’t need to have huge capital to start investing. So, don’t delay your financial goals any further and choose your investment vehicle thoughtfully.

Post Author: Amrina

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