When it comes to investment, Systematic Investment Plan (SIP) has become a buzz word and investment in mutual funds through SIP has become extremely popular among mutual fund investors. However, a large number of investors are still confused about how to invest in mutual funds through SIPsor how to invest in SIP online.
Systematic Investment Plan is an easy and convenient way to invest in mutual funds and it helps you to become a regular investor in mutual funds. The frequency of investments can be daily, weekly, monthly or quarterly as per the investor’s choice (Subject to availability of these frequencies with the respective AMCs). There are many benefits of investing in equity mutual funds through SIP, since investing in SIP helps the investor to average out their purchase cost and maximize returns. However, the most beneficial factor is the financial discipline imparted on investor by SIP, provided the investors stay invested for a longer duration irrespective of the market conditions.
Today with the advent of digital platforms, investors find it easy to invest online in mutual funds compared to the traditional way of investing by filling up application forms etc. Online investment options have made life easier for the investors. There are many ways to use the digital platform for investments, for example – you can invest a lump sum amount in the schemes of your choice, and you can make additional purchase in your existing schemes or even choose to start a paperless SIP.
Let us now see how to invest in mutual funds through SIPs
Please note that to invest in mutual funds either through SIPs or lump sum, KYC is a mandatory requirement. To make a mutual fund KYC, your address proof, address proof, Aadhar Card and PAN Cared etc. is a mandatory requirement. Here are the steps that one need to follow –
Step 1: Collect necessary documents
In order to invest in mutual fund SIP online, some basic documents are required. The investor need a PAN card, an address proof in the form of driving license/bank statement/utility bill, a passport size photograph, Aadhar Card and cheque for the bank details. Having an Aaadhar number will simplify the process.
Step 2: Be KYC compliant
First of all, it is mandatory to comply with the Know Your Customer (KYC) requirements to invest in mutual funds. The investor can get this done through eKYC using the Aadhar Card. For this one-time exercise, the investor need to provide basic information like name, date of birth, mobile number, address, and upload a copy of address proof, PAN, identity proof and passport size photograph online. A video call is required for IPV (In-Person-Verification) to confirm the details but this could be avoided if the investor completes the eKYC procedure using the Aadhar number.
Step 3: Provide necessary details
As the investor is done with two steps – Organizing the necessary documents and KYC, he has to follow the steps mentioned below to start a mutual fund SIP online.
The investor can visit the website of the fund house (AMC)in which he wants to invest. There is a ‘Register Now’ or a ‘New Investor’ link in the fund house website, where the investor need to provide personal details, nominee details, bank details and answer few FATCA questions. Post this a User Id and password is generated for transacting online.
Step 4: Decide Investment Amount and Scheme
This again is an important step, where the investor has to specify the SIP amount.
Most of the AMCs provide an online SIP calculator to help the investor to know the amount to make a decision based on the financial goal, and how much to invest daily/ monthly/weekly to accumulate the desired goal corpus. Investor can invest accordingly by knowing the amount with the help of this online tool.
If the investor has already decided or know the exact SIP amount then he or she can straightaway fill up the investment amount in the box provided without taking the help of the calculator.
Investor need to select the scheme he has decided to invest in along with the plan and option. Generally investors can go with either regular plans or direct plans and can opt either for growth option, dividend payout option or dividend reinvestment option. Please note that investor cannot opt for dividend reinvestment option if he is investing in ELSS scheme
Step 5: Decide Investment Type, Payment Mode and Date
The investor needs to decide whether to make a daily, weekly, monthly or quarterly investment. Once the decision is finalized, then the investor selects date/sand to make the payments for SIP. It is important to choose this date wisely. Now the investor has to select the mode of payment. There are few options as the amount can be auto debited from the investor’s account through registration of OTM (one time mandate), Net banking or NEFT/ RTGS payment.
Step 6: Submit Transaction
Once the investor fills in all the details required in the form and submits the transaction, it is submitted to the AMC. The AMC sends an acknowledgement through email and SMS and keeps sending reminders prior to future SIP dates.
Generally the next SIP date can be a date of investor’s choice after 15 – 21 days (depending upon the AMC) from the first investment date.
In case of any issues in setting up the SIP, usually the service team of the AMC writes to the investor or call and helps in sorting out the issue.
The investor can also visit the AMC website and login to check the status of investments etc.
Now that you know how to invest in mutual funds through SIPs and also how to invest in SIP online, why do not you opt for the simple way to start a SIP in mutual funds?