SIP is the best and easiest way to make money. Most people invest in SIPs to make their dreams come true like buying a house, a luxury car, going on a world tour, etc. The main reason why people go for SIPs is the rate of returns. Suppose you are saving your money in a bank account, the rate of interest you will get is around 4%, but the rate of returns for a SIP will be much more than that.
There are 2 routes through which you can invest in mutual funds through SIP:
- The Equity Mutual Funds: This is a kind of mutual fund where the fund manager buys the stock at a lower price and sells it at a higher price. The rate of interest on the funds totally depends on the stock market.
- The Debt Mutual Funds: This is a kind of mutual fund where the fund manager invests your money for fixed income security. Here you will get lesser returns than equity mutual fund but the rate of risk will be very low.
A fund manager will provide you with all the information about your investment and returns. They focus on maintaining the transparency between an investor and a company.
If a person wants to invest in SIP then they can either go for the online option or the offline option. In the offline option, paperwork is involved and it is a long process. While in online option, the person has to fill the form on the internet and it is not at all time-consuming.
Steps to follow for starting a SIP:
- Know your customer (KYC)
Whenever you are willing to invest through SIP in mutual funds, you need to complete a KYC process. It is important because the companies want genuine investors. You just need an ID proof, passport size photograph, and an address proof. Having a PAN card is a plus point. This is a one-time process. If you are willing to do it online then you can just go to the eKYC site and register yourself.
- Look for the best fund
There are many options available. A person can also invest via an Asset Management Company or through an intermediary. These are investment services companies. With so many choices available, it becomes challenging to make the right choice. Asset management companies will help you to identify the right balance between equity and debt. The service providers know everything about the market including its past performance and investment attitude. They can also complete the KYC process and also provide you with the application form of the selected fund. These companies and intermediaries focus on making the process convenient.
- Choose your monthly willingness for the investments
When you will receive the form, you have to mention the value that you are willing to invest for the decided period of time. Every person invests for the different reasons i.e. for any financial goal, any personal requirement or for securing their future. Also, there is an online SIP calculator where you can calculate the value of your investments at the end of the SIP.
- Select a desirable Payment Date
It is very important to decide a time for an investment. SIP gives you a chance to choose according to the willingness i.e. whether to invest weekly, monthly or quarterly. Then choose a specific date for the payment. Then choose the desired mode for payment. You will get two options, either the amount from your bank account will automatically get debited or you can pay it manually with via a cheque or cash.
NOTE: Remember, you cannot change the payment date later, so take your time and carefully select the date.
- Submit a properly filled form
After filling the form, you have to submit it online or to the asset management company. Asset management companies may give you tips on how to reap maximum benefits from your SIP and may even fill out the form on your behalf. The asset management company will also send you emails and messages to keep you informed about the profit, due dates, etc.