How to start SIP in mutual fund

SIP Mutual Fund or Systematic Investment Plan is a periodic investment option wherein the investor can invest in mutual funds in instalments at a regular frequency, like weekly, monthly, fortnightly or half-yearly. There are several advantages of investing through SIPs.

  • SIP mutual fund can be started with as small amount as Rs 500 from your regular savings. You do not need to have a large amount to invest.
  • Through SIP mutual fund you can invest the money which otherwise you would have spent on some discretionary item; therefore, SIPs make your savings more productive.
  • SIP mutual fund makes market timing irrelevant. As no one can predict accurately how markets will behave, by investing a small amount regularly, in both rising and falling markets, you can benefit from Rupee Cost Averaging and get superior returns over a long investment horizon.
  • SIPs can create long term wealth through the power of compounding.
  • SIP Mutual Funds are very flexible as you can choose the investment frequency and the dates when you want each instalment to get debited from your bank account.
  • There are no penalties if you have insufficient balance in your bank account on the ECS date, however, if the ECS fails consecutively for few months, the SIP in mutual fund mightly get cancelled.
  • SIP mutual fund can be stopped at any point of time by writing to the Asset Management Company (AMC) or Registrar and Transfer Agent (RTA).

Do you know What are Mutual Funds In India

What do you need to start an SIP Mutual Fund

  • As per SEBI regulations, you need to be Know Your Client (KYC) compliant to invest in mutual funds. You can fulfil KYC requirements by submitting filled in KYC form with your photograph and self-attested documents like PAN and Aadhar or any other document for verifying the address proof. The KYC form is available for download on AMC websites and R&T agent’s websites.
  • However, in person verification will be required and you will have to carry original identity and address proof documents to the AMC or R&T office. AMFI registered mutual fund distributors are also authorized to conduct in person verification. If you submit your KYC documents through a AMFI registered distributor, he or she can conduct the in-person verification at your place and you are not required to go the AMC or R&T office for in-person verification.
  • However, if you are an existing mutual fund investor, you are likely to be KYC complied, but you should still check if your KYC is verified or not before investing again.
  • You must have a bank account as generally cash investments are not allowed in mutual funds. You have to provide your bank account details (Bank name, Address, Account number, IFSC and MICR code) in your mutual fund application form. A copy of cancelled cheque of your bank account is required as supporting document as mutual fund SIP ECS will be debited from this account and also the redemption proceeds will be credited in this account.
  • Before starting SIP in Mutual Funds, you have to select a good mutual fund scheme in which you want to invest through SIP. You have to choose an option - growth option or dividend option. Within dividend option you have to choose ‘dividend payout’ or‘dividend re-investment’ option.You also have to mention the AMFI Registration Number (ARN) and the EUIN (Employees Unique Identification Number) of your distributor. A good mutual fund advisor will always help you with your investments in mutual funds.
  • For mutual Fund SIPs, in addition to the above formalities, you are also required to submit the Auto Debit ECS Mandate also known as SIP registration form. The ECS mandate authorizes your bank to debit the SIP instalment amount from your bank account on the date chosen by you and remit to your mutual fund account. You can choose multiple dates in a month. Investors should note that your signature in the SIP debt ECS mandate form should tally with that of your signature in the bank’s record.

Starting in SIP in Mutual Fund is quite simple, if you can understand the process. The best part of SIP in mutual fund is that, once you start a SIP, your investments are in an auto pilot mode which helps you in creating wealth in the long term.

You should also know what are the 6 points to remember before you start your mutual fund investments