How to invest in SIP (Systematic Investment Plan)

The Indian equity market is near its all-time high, BSE Sensex over 39000 and the 11,500-mark on the NSE’s Nifty 50. Valuations-wise the Indian equity market seems little expensive. During such times investing your money at one go, in lump sum, can prove unsafe. Hence, opting for the SIPs (Systematic Investment Plan) instead would be a sensible approach, especially when you’re addressing to long-term financial goals. In this article we are going to discuss how to invest in sip.

First, let’s understand what is meant by SIP…

SIP is short for Systematic Investment Plan. Systematic Investment Plan is nothing but a method of mutual fund investing in a systematic and regular manner. There are two main ways to invest in mutual fund schemes – lump sum and SIP. Lump sum investment is when you invest all your funds at one go into a particular scheme.

SIP enables you to invest a set amount in your favorite mutual fund schemes on a regular basis. Every month, a fixed amount is deducted from your savings account in SIP and is directed to the mutual fund in which you choose to invest.

Why Invest in SIP?

No need to time the market

SIPs can help you manage the market volatility well. Market timing can be detrimental to your wealth and health. Instead focus on ‘time in the market’ in the endeavour to create wealth by selecting the best mutual fund scheme to invest.

Studies shows that equity market outperform other asset class’s debt, gold and real estate over the long-term and are effective to counter inflation.

Lighter on the wallet

SIPs enable you to invest in smaller amounts at regular intervals like monthly. This in turn reduces your burden of paying a lump-sum amount from your bank account.

If you cannot invest Rs 10,000 in one shot, that’s not a huge stumbling block, you can simply take the SIP route and trigger the mutual fund investment with as low as Rs 500 per month.

Power of compounding

The advantages are magnified by the compounding impact when you spend frequently through SIP and invest for the long term. Your money is growing over time as returns are generated by the cash you invest. And the returns also receive returns, i.e. your real investments over time plus returns are compounded over the years, which can develop over a period of time into a big amount. For example, the graph shows the effect of compounding on Rs. 1000’s monthly investments over a period of 30 years in investments offering different yield rates, i.e. 6% p.a., 10% p.a. And a 15% p.a. A monthly investment of Rs. 1000 for 30 years in an investment offering 6% p.a. return can give you Rs. 10 lakhs vs. Rs. 70 lakhs an investment offering 15% p.a. return.

how to invest in sip power of compounding

SIPs enable rupee-cost averaging

Mutual funds invest in the markets, and the markets are a volatile place to be in. However, by investing regularly through a SIP, you can average out the costs of investing, buying more units when the NAV of your fund is low and fewer units when the NAV of the fund is high. This is known as rupee cost averaging, and this makes any time a good time to invest as it minimizes your exposure to market fluctuation.

To open a SIP account- 

1: Log on to an online mutual fund platform and create a free account.

2: Enter your information like name, DOB, address, bank account details, etc.

3: Upload KYC documents.

4: Speak with the mutual fund investment expert or our contact us to determine your individual goals and the amount of risk you’re willing to take.

5: Choose a system for mutual funds, begin the SIP and watch your cash develop

Our Parameters to Select Best Mutual Funds for Invest in SIP

How to invest in SIP in India we have gone through the following key parameters.

Asset Size

We have selected the funds which manage a big amount. The big schemes are generally from the reputed fund house. You can be assured of the professional management. We have shortlisted only those mutual fund scheme which has the asset size of more than ₹1,000 crore.

Risk

Among the top performers, we have picked only those mutual funds schemes which have been good performer consistently. If the industry passes through the recession, the fund should not take too much risk as it can be damaging. We have picked only those mutual funds which took the low or average risk.

Fund Manager

The performance of a mutual fund scheme largely depends upon the fund house and fund manager. You can expect better results in the future if a performing fund manager sticks to the system. But you’d be in the dark in the event of a fresh fund manager. That is why we have chosen only those funds which have the same fund manager since last 3 years.

Performance

Finally the return of the mutual fund. In selecting the best mutual fund in India, the efficiency of a mutual fund system is the most crucial. Because building wealth would be the only factor. We only chosen those resources that have yielded above-average returns over the last five years and three years.After this filter, we have picked the top performing mutual fund schemes for the last 3 years.

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