Learn how to start an online SIP in a mutual fund

Starting your financial journey and investing in mutual funds can open doors to your financial stability, both now and into the future. With careful planning, mutual funds can help you add security and flexibility to your long-term strategy.  

One key decision with mutual funds is whether you will invest in them via the lump sum method or opt for a systematic SIP approach. Some investors prefer the convenience of making one large payment, while many others recognise the discipline and control provided by the systematic approach of an SIP.

SIPs allow investors with smaller budgets or limited resources access to similar growth potential as those with larger investments. SIPs also leverage rupee cost averaging to minimise the impact of market fluctuations on your investments over time. With so many benefits associated with SIPs, here is how you can start an online SIP and begin building your financial portfolio right away.

Step 1: Set a timeline

When starting an investment in mutual funds or any other plan, you should set timelines for yourself. Note that the longer your timelines are, the better your returns. This is because it gives your investment more time to grow and benefit from compounding interest. Plus, by investing fixed amounts in an SIP at regular intervals regardless of market fluctuations, the rupee cost averaging allows you to purchase more units when prices are lower and fewer units when prices are higher. 

Step 2: Understand your risk appetite

Before investing in mutual fund schemes, determine your level of risk tolerance. Generally, there are three types of investor risk profiles: aggressive, moderate, and conservative. 

An aggressive investor may be willing to take on higher levels of market volatility with the hope of gaining higher returns over time, whereas a conservative investor may prefer lower volatility investments that protect their capital while still providing some potential growth opportunities. 

Understanding which type best fits your personal investment goals can help you select the best mutual funds for your portfolio.

Step 3: Use an online SIP calculator 

An SIP calculator can help you calculate your SIP returns and how much money should be invested each month to reach your financial goals within the desired timeframe. It shows the estimated returns based on factors such as current interest rate, investment amount, and tenure. Using this information, you can adjust your monthly contributions accordingly and create a plan that works for you.

Step 4: Opening an account with the fund house  

Opening an account with the fund house involves visiting their website, registering yourself, filling out basic information about yourself such as name, age, address, etc., along with submitting some supporting documents such as ID proof and address proof. Also, provide the details of the bank account from which you will make payments for your SIP investment.

Once all required documents have been submitted successfully through the website portal or the mutual funds investment app, you will receive your login details and begin your online SIP journey.  

Step 5: Start an SIP online

Finally, visit the fund house or broker website and log in to your account. After that, follow these steps:

  • Decide which mutual fund is best to start an SIP.
  • Select the investment tenure (for example – 7 years, 10 years, etc.).
  • Enter the amount you want to invest in the SIP mutual fund and the frequency of payments.
  • Register your bank mandate for the SIP to authorise debits from your account for SIP investments. Once done, your SIP may start after a gap of a few days.

Closing thoughts

You can invest in an SIP online and bring discipline into your finances – a key factor in achieving financial freedom. It allows you to start investing with minimal investment cost, build a systematic approach to investing, and avoid the common mistake of trying to time the market. 

However, it is important to invest the right amount. Investing too much may cause financial hardship in future, while too little won’t offer the desired benefits. Thus, it is highly recommended to use an SIP calculator, which can help you calculate the returns from your SIP investment and estimate how much you need to save regularly to reach your targeted goal.

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