How to Invest in SIP for Beginners​?

What is SIP for Beginners?

SIP is a method of investing a fixed amount in mutual funds every month. It’s perfect for beginners as it reduces the need to monitor the market every day and helps them earn returns through regular contributions.

SIP Calculator

I know my investment amount I know my goal amount

Monthly SIP Yearly SIP Lumpsum

I want to invest Pro Tip

Financial experts suggest that a person should invest 10-15% of their monthly income for long-term financial growth

/Month

I want to invest for Pro Tip

Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively

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Expected return Pro Tip

Top 25% of investors consistently generate more than 12% return

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Total Wealth ₹22.4 L

View Plans

I want to save

I want to invest for Pro Tip

Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively

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Expected return Pro Tip

Top 25% of investors consistently generate more than 12% return

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Monthly Investment ₹22.4 L

View Plans

Top Funds with High Returns (Past 7 Years)

19.3%

High Growth Fund

15.61%

Accelerator Mid-Cap Fund II

15.48%

Opportunities Fund

How to Start a SIP for Beginners?

Starting a SIP is straightforward. Here are the essential steps:

1. Complete KYC Requirements:

   • Gather necessary documents: PAN card, proof of address (Aadhaar, passport), and a passport-sized photograph.

   • Complete KYC (Know Your Customer) formalities either online or at authorized banks or post offices.

2. Choose a Mutual Fund:

   • Research and select a mutual fund that aligns with your financial goals and risk appetite.

   • Consider factors like past performance, fund manager reputation, and expense ratio.

3. Register for an Account:

   • Sign up with a broker or directly with a mutual fund house.

   • Fill the application form with personal details and bank account information.

4. Investment Amount and Frequency:

   • Decide how much you want to invest monthly or quarterly using an SIP return calculator.

   • Choose a convenient date for automatic deductions from your bank account.

5. Submit Your Application:

   • Complete the registration process by submitting your application online or offline.

   • If applying online, ensure you have an e-mandate set up for automatic transactions.

Points to Consider Before Investing in SIP

You should consider the following points before you start investing in a SIP plan:

• Investment Goals: Set clear financial goals to ensure your SIP investments are aligned with your objectives.

• Risk Tolerance: Assess your risk appetite to choose the right type of SIP (equity or debt) based on your comfort with market fluctuations.

• Time Horizon: Choose an investment period that suits your goal, as a longer duration can lead to better returns.

• Start Early: The earlier you invest, the more your money will grow due to the power of compounding over time.

• Amount to Invest: Decide a monthly investment amount that fits your budget without impacting daily expenses.

• Market Volatility: Be prepared for market ups and downs. SIPs average out your cost over time, reducing volatility’s impact.

• Regular Monitoring: Review your SIP’s performance periodically to ensure it aligns with your financial goals.

• Expense Ratio: Consider the fund’s expense ratio. Lower ratios generally result in better returns.

• Diversification: Spread your investments across different asset classes to reduce risk and ensure consistent returns.

• Tax Benefits: Tax-saving SIPs like ULIP or ELSS allow you to claim deductions under Section 80C of the Income Tax Act.

Key Benefits of Investing through SIP

The key benefits of SIP investment are listed below:

• Rupee Cost Averaging: SIPs average your investment cost, which helps reduce the effect of market volatility.

• Compounding Power: Starting early lets your investments grow through compounding, increasing wealth over time.

• Affordability: SIPs allow you to start with a small amount, making them accessible to everyone.

• Discipline: SIPs encourage consistent, disciplined investing, crucial for long-term wealth accumulation.

• Flexibility: You can easily adjust your SIP by increasing, decreasing, or pausing it based on your financial situation.

• Diversification: SIPs help diversify your investments across various asset classes, spreading risk.

• Tax Benefits: Tax-saving SIPs under Section 80C can reduce your taxable income.

• Automatic Investment: SIPs are automated, so you don't have to worry about timing the market.

• Reduced Timing Risks: SIPs remove the need to time the market, as they involve consistent, long-term investments.

Conclusion

SIP is an excellent investment option for beginners to invest in mutual funds. It helps you invest regularly, grow wealth over time, and achieve your financial goals. Start small and let the power of SIP work for you.