How to invest in mutual funds through SIP online and offline? All you need to know
SIP means systematic investment plan. It is an easiest way to invest in mutual funds at regular intervals, viz. weekly, monthly or quarterly, as per preferences. Investing directly in the stock market can be risky, as it may need careful study and knowledge to predict the correct timing for investment as well as liquidation.
How to Start SIP?
Let us check the step by step process of how we can start investing in SIP:
1. Register for SIP. Familiar with opening a social media account? If yes, then you will not feel stranger here too. All you require is to visit the website of an online mutual fund distributor and sign up with them. At Orowealth, for instance, you just need to sign up with us and fill in your details. Then remains the final task of filling in the bank details through which the SIP amount will be deducted, to complete the registration process.
2. KYC Requirement. To invest in SIP or mutual funds, one has to comply with the ‘KYC’ norms. The essentials for KYC are PAN card, an address proof, a photograph & a cheque book. The KYC compliance can be done either by visiting online registering websites or through transfer agents or via a fund house that provides e-KYC. One final step in KYC is in-person verification. This KYC process just needs to be completed one time; you need not require for any subsequent investments.
3. Choose the SIP. Now comes the business end of the process, where you need to choose the correct SIP which fulfills your needs. Depending upon your risk taking capacity, funds can be allocated. In case high risk tolerance, equity-linked funds can be preferred and in case of low risk acceptance, debt or balanced fund could deem ideal. Next question is how much to invest? The answer would be easy if you have a target (vacation, car, corpus for property down payment etc.) in mind otherwise for investment purposes, any amount from Rs 500 or Rs 1000 and above could deem sufficient. When to invest? For salaried persons, T+2 is the ideal date, T being the date of salary received in bank and for others depending upon your business needs and funds availability the date could be set.
How to Start SIP Offline?
Where there is a will, there is a way. When the internet is not your cup of tea, there is on option to invest in SIP offline. The KYC compliance is necessary here too, and the same can be complied offline. The step starts with approaching a representative from fund house or any financial advisor who provides such services. Once the KYC formalities are completed, fill in the application form with your personal details. While filling the details make sure the email ID & mobile number are entered correctly as they are the only means of communication and for subsequent investments. Once the form is complete, attach the copies of the PAN card and Aadhaar card for identity and address proof. In addition to that, one cancelled cheque along with a bank mandate form is to be enclosed to the application form. Once all the above formalities are completed, a folio number is allocated to the investor for that particular investment. Thereafter the investor receives a statement of his/her investment for every month just like a bank account.
Benefits of SIP
# Rupee Cost Averaging. The stock market is the definition of volatility, where timing is the essence of transaction. However, many people might not be able understand the timing, let alone match it. SIP investment helps you purchase more units of mutual fund when the market is down and vice versa. Thus rupee cost averaging eliminates the need to time one’s investments and protects from market volatility.
# Wealth Accumulation. A small amount of savings at regular intervals is key to wealth building. The returns get the benefit of compounding where the invested amount and the accumulated return are pooled together to gather wealth.
# Easy Exit & Liquidity. The units (other than lock-in) are highly liquid. They can be sold at the prevailing rate and the money is deposited into your account within two working days. Further the SIP can be stopped at any intervals and resumed as and when required.
# Inflation Proof. Today’s Rs 100 is tomorrow’s Rs 99 and so on. The power of money decreases with time due to inflation. Therefore, to keep today’s 100 intact, the investment must be chosen wisely and keep the money future ready. The SIP method helps in keeping the inflation at bay by keeping it on track with the economy.