Systematic Investment Plan (SIP) is an investment route that is offered by Mutual Funds where one can invest a certain amount in any Mutual Fund scheme at regular time intervals say once a month or once a quarter or half yearly, instead of making a lump-sum investment. The installment amount could be as little as INR 100 a month and is quite similar to a recurring deposit.
|What is the full form of SIP|
|The full form of SIP is Systematic Investment Plan|
SIP is convenient as we can instruct our bank to debit the fixed amount from our bank account every month. SIP has been gaining much popularity among the Indian Mutual Fund investors.
Given below are three easy steps through which we can open a SIP account online:-
1. Arrange All Necessary Documents for SIP
Few documents are required to start an SIP online: a PAN card, an address proof of any sort, a passport size photograph and a cheque book or a bank passbook for bank details. As the entire procedure will be completed online, a computer with an internet connection is required.
2. Comply With The Know Your Customer (KYC) Requirements
It is compulsory to fulfill all Know Your Customer (KYC) requirements before investing in mutual funds. We should provide basic information like name, date of birth, mobile number, address, etc
3. Start the SIP online
After completing the KYC requirements we can visit the website of the mutual fund where we want to invest. We should search for a ‘Register’ or a ‘Start New Investment’ link. We will be asked to fill out a form which contains basic details such as name, date of birth, bank details etc. We can select the username and password of our choice which we can then use to log in and select from the various schemes available.
We will be given a Folio number after selecting a scheme and this number will be the reference number for our investment. Once our bank details are verified we can then instruct the bank to debit the money accordingly. The SIP will start after a gap of a few days.
Some key points to note before investing:-
- Before investing, we must first identify our goals i.e short-term or long-term for the investment.
- Risk tolerance factor should always be taken into account.
- We must decide for how long we want to hold the mutual fund.
- A bit of research and understanding will help us in investing more efficiently.
Selecting Mutual Funds for SIP
There are various mutual fund schemes available for investing. Some of them are short-term and some long-term. There are many startup companies as well as well-established mammoth industries where we can invest, that have high returns but they have a high risk factor too. Others have low returns but low risk factors. It is important to note that the majority of the short-term schemes offer high returns but the risk factor is considerably high. So, depending on our needs we can select the best scheme available to us.
The most important thing of note is:-
“Mutual Funds are subject to market risks. Please read all scheme related documents carefully before investing”.
Steps to Calculate Returns of SIP
- We type all our SIP dates in one column and then the SIP amount in another column corresponding to the SIP dates.
- Then, we enter the total market value of all our units and enter the date at which we want to check the returns and the market value.
- Now, we use the XIRR function and enter Values, Dates.