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What is SIP Mutual Funds - How to Invest in SIP Mutual Funds?

What is SIP Mutual Funds

SIP stands for Systematic Investment Plan. The name itself signifies that it is a systematic way of investment. It allows you to invest a fixed amount in a mutual fund scheme of your choice. In this, a fixed amount gets deducted from your bank account and is directed to your chosen mutual fund scheme.

What is SIP in mutual funds?

SIP is a vehicle offered by mutual funds to help investors invest a fixed amount regularly in a systematic way.

What is the difference between SIP and mutual fund?

Know more about SIP vs Mutual Fund. A mutual fund is a financial instrument that enables you and other investors to pool money in stock market especially if you opt for equity mutual fund while SIP is a method of investing in mutual fund and not a type of instrument.

How to invest in SIP mutual funds?

It is important that you invest wisely in SIP. Investing in too many mutual funds may also put you in a fix. Also, make sure to check the past years performance of the mutual fund scheme you wish to invest. This will help you understand whether you should invest in it or not.

You may wish to invest lump sum amount in equities but as a matter of fact, it will not be beneficial in short term as longer term both will give you better returns. This is because of the fact that you will have to lock a large portion of your money in the assets. Although it may perform well initially, the fluctuating market will not guarantee that it will do well later as well. For instance, say you invest a lump sum amount in a particular mutual fund SIP which starts under-performing for two-three years. Since you have invested a lump sum in this mutual fund, there are chances that your returns will be invariably low.

Lump sum investments are best when one is sure that the market moves upwards at all times. Investors having bulk/large funds always and are vary of going by monthly route and those who have a 7-10 years horizon still prefer Lump sum investment. In volatile markets and for a small or salaried investor, SIP is best mode of investment.

This situation can be avoided with SIP Investment, as it allows you to monitor your fund’s performance on a regular basis. In other words, it can be said that SIP allows you to invest in a mutual fund in periodic installments.

In all likelihood, it is advisable that you have a balanced and well diversified portfolio if you are a beginner.Ensure that you invest in a combination of small-cap, mid-cap and large cap funds to avoid any major setback in your investment.

Advantages of SIP Mutual Fund

  • Power of saving

  • Convenience

  • Rupee cost averaging

  • Compound interest

  • Disciplined investing

These are few of the advantages offered by SIP in mutual funds.

How much to invest in SIP?

If possible invest at least 50% - 60% of your money in the equities of different classes as mentioned above. This will give you a robust return over a period of time. It is advisable that you look for long -term equity investments rather than short term, as irregularities in the market tend to correct over a period of time.Also, you will have to be patient during your investment tenure.

Avoid moving out your funds as you tend to enter a new asset whenever there is a dip in the market and by moving out you will only increase your expenses. Contrary to the belief that you should sell your shares when the prices are high, moving your funds out will only reduce your overall return.

Do remember that the market is volatile in a short period and it is only natural that you see both profit and loss during the tenure of your fund. The trick to survive the ups and downs is to stay invested for as long as possible and see your money grow. Avoid exiting from the market or stopping your SIP when the market is under-performing.

The major advantage of SIP is that it helps during both the cycles- profit and loss. It is due to the fact that you tend to select your funds based on its last few years’ performance and also because you create a balanced portfolio. At the end of your investment tenure, it is the selection and creation of a balanced portfolio that helps you get more returns than your invested amount.

How SIP mutual fund works?

To understand it better, here is an example.

Say you earn a salary of Rs.60,000 per month and you decide to allocate 10% of it toward your SIP investment. It means, every month Rs.6000 will automatically get debited from your account towards SIP payment.

Now, as you can see that every month Rs.6000 gets deducted from your account, it proves that SIP is systematic. This ensures there is consistency and discipline in your investment.

SIP involves compound interest which makes it really powerful.From the above example we can see that if you pay Rs.6000 per month for a period of 10 years, a total of Rs.7,20,000/- would be deducted from your account. Using the compound interest technique, you will get about 17% return on your overall investment which amounts to Rs.14,08,109, almost double of what you invested.

There are chances that the mutual fund process you invested may go higher and give you better returns. In general, it is believed that a good SIP plan consistently outperforms the market and provides you with a good corpus at the end of a long -term investment tenure.

Simply put, it is best to invest in SIP mutual fund at an early age to understand how it works and also enjoy its long-term benefits.

Which is the best SIP Investment Plan to invest?

There are several mutual funds available in the market that you can think of investing in. You will have to do a thorough research about the ones you are interested in before you invest.

However, it is recommended that you may contact a qualified financial advisor and seek guidance.

If you want to start investing in SIP online by login on to our website, call us or send us an inquiry and we will immediately get in touch with you.

Following these simple steps you can get yourself started and make your money grow.

  • Step 1: Ensure you have all the required documents. Important documents such as your PAN card, Aadhar card, driving license, bank statement, utility bill, passport size photographs etc need to be maintained and kept ready.

  • Step 2: Get KYC done. Before investing in mutual fund, you must get the KYC done. In this, you will have to provide personal details such as your name, date of birth, address and mobile number. KYC is a one-time exercise that will enable you to invest in mutual fund.

  • Step 3: Start SIP Investment.

You may start your SIP investment immediately after getting your KYC done.

SIP Investment is a truly a disciplined approach to achieve your financial goals. It offers several benefits when started early and when done patiently. Always hire an expert to help understand the working of SIP. It is advisable that you invest for a long-term and remain unaffected by the fluctuations in the market.


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