How to Invest in Systematic Investment Plan (SIP)

A Systematic Investment Plan (SIP) is a way of investing in Mutual Fund schemes. This plan allows you to invest small sums of money at a pre-determined time, at regular frequencies. It lets you choose how much money you want to invest and set a timeline per your comfort. The frequency can be monthly, quarterly, or yearly. SIP is an excellent discipline way to start your investment planning and helps mitigate risk. With well-designed protocols, SIP enables you to invest properly and guards your finances against the ever-changing market trends.

When you invest in a Mutual Funds scheme using a SIP, you only buy the fund units corresponding to your investment amount. The SIP works on the power of compounding. Hence, the probability of attractive returns is higher from your SIP investment.

Let us understand how SIP works with an example.

Say you invest ₹6000 in a particular Mutual Fund scheme using SIP. The investment frequency you choose is 1 month. This means every month ₹6000 will be debited from your account towards your preferred Mutual Fund scheme. The Systematic Investment Plan, through the power of compounding, will accumulate considerable money as the returns on your investment.

Investing using a SIP can seem daunting at first. However, here are some things to take care of before you start your SIP:

​​​​​​​

Step 1: Set investment goals 

The most important step is to know your risk tolerance. You have to set your goals and gauge how much risk you can take. Any investment comes with a certain degree of risk. Determine the objective of your investment and get an ideal portfolio.

Step 2: Choose a Mutual Fund scheme 

There are various schemes available in the market. The funds you select should consider your goals and risk tolerance. Evaluate the recent performance of the Mutual Fund you prefer.

Step 3: Apply

Once you have chosen your preferred scheme, you can now apply for the SIP of your choice.

The application process is simple, too. Here is what to do:

• Fill in the proper application form and link your Demat Account.
• Submit a cheque for the SIP amount you want to invest.
• Fill out the KYC form.

​​​​​​​

Step 4: Select the date of the SIP 

The SIP protocol debits the pre-set amount from your account automatically. You have to select a particular date that is convenient for you. You also have the option of selecting multiple dates for SIP payment.

Step 5: ​​​​​​​Deciding the duration of your investment 

You should set the duration of the investment that meets your investment and financial goals. You can use a SIP calculator to see what returns you will get for a given period.

​​​Step 6: Decide if you want to invest online or offline 

The SIP allows you to invest online and offline. Choose the option that is the most convenient for you.

If you follow the given steps, you will easily know how to invest in SIP.​​​​​​​

Some of the benefits of SIP investing are:

• SIP investment is convenient and hassle-free.
• You do not have to put in time and effort for SIPs.
• You can even start your investment with as low as ₹100 a month.
• You do not have to time the market in SIP investment. You buy fewer units when the market is bullish, and you buy more units when the market is bearish.
• With the power of compounding interest, you will accumulate substantial returns over a long period.

Click here to learn more about SIP or apply for a Demat Account at HDFC Bank.

Want to know more about SIP and a lump sum investment? Click here to read more!

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action.