How to Invest in SIP | A Powerful Guide for Beginners

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SIP or Systemic Investment Plan is an investment vehicle that enables individuals to periodically make a small but thoughtful contribution to their desired mutual fund plan. Investors choose investing in SIP because it encourages regular investing habits, helps mitigate risks, and requires disciplined financial planning. Investors can claim the benefits of both rising and falling markets by investing in SIP.

However, new investors are confused with several questions, such as how to invest in SIP and How to open an SIP account?, How much should I invest in SIP? In this article, we will try to cover all the questions and doubts among investors.

How to Invest in SIP

How much to Invest in SIP? 

How much to invest in SIP depends on your financial goals and the corpus required to achieve them. Another factor is your risk appetite, your affordability, your timeline for investing, etc. The ideal SIP investment amount is different for different people.

For example, Assume you earn $6,000 per month and invest $120 per month through SIP, which is 2% of your salary. At this distance, your investment is too low; even $300 is not enough. At the same time, your friend earns $3,000 and invests $400 per month. This is an ideal amount for investing in SIP. Financial advisors often advise investors to invest at least 10-20% of your earnings in SIP investments.

How to Set SIP Goals?

Any SIP investment aims to ensure that your portfolio has the desired level of risk. Your desired risk should be according to your tolerance, and you should also initiate diversification across various asset classes. To earn maximum returns on your investments, diversification is essential. The important criteria that should match your mutual fund are:

  1. Mutual funds total assets are significant
  2. The mutual fund has been around for at least 5 years.
  3. Always try to choose a well-known mutual fund house
  4. Your SIP investments should be in contact with your bank


How does SIP work? 

It is essential to understand the initial workings of SIP before getting to how to invest in SIP. In SIP, investors choose a mutual fund scheme according to their financial goals. After choosing a mutual fund scheme, investors can invest it periodically, such as weekly, monthly, quarterly, or annually.

Let’s understand with an example.

Assume your monthly salary is $6,000 and you invest 10% of that money in SIP.

Now, you first started investing $600 per month in the XYZ fund in May 2010. Your $600 will be automatically invested in SIP per month. From May 2010 to May 2020, you made 120 investments. Today, the total capital invested would be $72,000.

If your investment return is 12%, the investment would have grown to $139k. It’s almost double your original investment.


How to Invest in SIP? 

Follow these steps if you are wondering how to invest in SIP?

1. Understand the Investment Objective and Your Risk Tolerance

Before investing in mutual funds, you should first understand your risk tolerance. It is essential to understand why you want to invest, and what your future goals are. To create an ideal portfolio, it’s vital to understand the objective of your investment.

2. Choose the Appropriate Mutual Fund

There are a variety of mutual funds available, but you should select one according to your financial goals and investment horizon. You should also take its past performance into account while picking the fund. After selecting your mutual fund, follow these steps:

a) Online Process

  • If you are a beginner, create a new account or login with an existing account.
  • Duly fill the KYC details
  • Make payment online

b) Offline/Physical Process

Duly fill the application form and KYC form (currently paused).

If you want to go offline, fill-out a cancelled check along with an auto debit form (ADF). However, if you choose the online method, fill-out the auto debt form (ADF) and submit it at the nearest branch. You will also need proofs, like address proofs, utility bills, etc.

3. Choose the SIP Investment Date

You can choose the date of your sip investment according to your comfort. You can also select multiple dates in a month for multiple SIP investments.

4. How long to Invest in SIP

SIP is a relevant way to fulfil your investment objectives. You can use the SIP calculator to estimate your mutual fund investments.

Calculate your SIP Returns

SIP calculator analyses the probable returns on mutual fund investments. SIP calculator shows the way to financial freedom. This type of tool helps investors, especially beginner investors, meet their financial objectives. It can provide you with an exact figure on the total corpus generated during the tenure.

It’s very easy to use SIP calculator. You just need to enter the SIP amount you wish to invest and the investment term (10,12 years, etc.). SIP don’t have a lock in period, but most financial advisors suggest staying invested for the long term as much as you can. In the end, input your investment’s expected rate of return.

Your next step, learning how to invest in SIP will not be a challenge for you once you are ready to invest in SIP. Don’t delay your investment process; remember, the earlier you start investing, the higher the chance of wealth creation. So start as early as you can.

Happy Investing!

Frequently Asked Questions (FAQs) 

How can I start investing in SIP? 

Some steps to start investing in SIP is given below:

• Choose a mutual fund

• Select an investment account

• Choose the frequently of investment

• Open a mutual fund account

• Set up the SIP

• Monitor your investment

Is SIP good for beginners? 

Yes, starting to invest in SIP is good for beginners. You can invest in SIP with very little money. Even if your earnings are low or your investments are low, you can take advantage of SIP by choosing to invest in various SIP plans in various mutual funds.

Is SIP better than FD? 

Systemic Investment Plan is a better investment plan than Fixed Deposit. SIP offers many benifits, like flexibility in investment, the advantage of diversification, higher returns, and tax benefits. That is why Systemic Investment Plan (SIP) is a better investment option than Fixed Deposit (FD).

Can I withdraw SIP anytime? 

Yes, you can withdraw your SIP before its maturity date but, it has its limitations. Investors can invest a small amount of money with regular investors and gain profitable returns in the future.

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