Beginners guide to start an SIP investment

Systematic Investment Plans or SIPs have become extremely popular among mutual fund investors. A SIP is a simple tool that helps you to invest regularly in mutual fund schemes of your choice.  You can start a SIP with a frequency of your choice: daily, weekly, monthly or quarterly. However, you must check with the AMC in whose scheme you are starting a SIP as all AMCs may not offer all the frequencies mentioned herein.

There are several advantages of investing through SIPs.

  • You can invest even small amounts from your regular savings and you need not to have a large amount to invest. Therefore, you can create a large corpus in the long run by investing small amounts at regular frequencies.
  • SIP makes market timing irrelevant. It is not possible to predict accurately how markets will behave, therefore, by investing at a regular frequency, in both rising and falling markets; you can benefit from rupee cost averaging and get superior returns over a long investment horizon.
  • SIP investments are very flexible. You can choose the investment frequency, amount and the date on which the SIP instalment can get debited from your bank account
  • You can stop your SIP at any point of time by writing to the Asset Management Company (AMC) or the Registrar and Transfer Agent (RTA).

How to start SIP investment?

  • As per SEBI regulations, you should be KYC compliant to invest in mutual funds. You can fulfil KYC requirements by submitting filled in KYC form with your self-attested photograph affixed on it. If you are submitting your KYC documents directly to the AMC or RTA, in person verification will be required. You will have to carry original identity and address proof of documents (Aadhar Card, PAN Card and address proof) and also submit self-attested copies of these documents.

AMFI registered mutual fund distributors are also authorized to conduct in person verification. If you submit your KYC documents through an AMFI registered distributor, he/ she can conduct the in-person verification at a time and place convenient to you, and therefore, you are not required to go the AMC or RTA office for in-person verification.

  • However, if you are an existing mutual fund investor, you are likely to have fulfilled all KYC requirements. Nevertheless, you are required to check if your KYC is verified before investing.
  • A bank account is a necessary requirement for starting a SIP. You have to provide your bank account details (account number, IFSC code) in your mutual fund application form. A copy of cancelled cheque of your bank account is also required as supporting documentation.
  • You have to select a mutual fund scheme and option in which you plan to invest through SIP. You also have to choose investing between regular plans (through a mutual distributor) or direct plans (directly with the AMC). If you are investing in regular plan, the AMFI Registration Number (ARN) and the EUIN (Employees Unique Identification Number) of the distributor has to be provided on the application form; if you are investing in regular plans, the distributor is expected to help you with filling out the application form and submitting the application with the AMC.
  • The other important part of how to start SIP investment is that you have to submit Auto Debit ECS Mandate form, commonly known as the SIP registration form. The SIP registration form authorizes the bank to debit the SIP instalment amount on the fixed date from your bank account and transfer to your mutual fund account. Your signature in the SIP registration form should match with that of your signature in the records of your bank.

The above is a procedure of how to start SIP investment offline. However, you can also start SIP online.  Let us now see how to start SIP investment online. Needless to mention since the whole procedure will be completed online, you will need a computer with an internet connection.

Step 1 – Arrange the necessary documents – You need to keep ready documents like Aadhar Card, PAN Card, address proof (Driving License or utility bill or bank statement), a passport size photograph and a cheque book to start SIP investment online; The cheque book will come handy to provide your bank details while Aadhar card is mandatory and can simplify the process of doing the mutual fund KYC.

As you may know, it is mandatory to comply with the mutual fund KYC requirements to start SIP investment online. You simply have to provide basic information like name, date of birth, mobile number, address, etc. You just have to go through the process only once, even if you are investing in multiple AMC schemes.

Step 2: Become mutual fund KYC compliant – It is mandatory to comply with the mutual fund KYC requirements for investing in mutual funds. You can become mutual fund KYC compliant online using the eKYC channel. Many fund houses (AMC) provide eKYC facility. Visit the website of one such AMC and start the process. You can also visit the website of registrars and transfer agents (R&T agents) of mutual funds like CAMS and Karvy who also provide this service.

You should fill in the basic information online and upload a soft copy of your PAN, Aadhar and address proof to support the details filled in the first step. You also have the option to complete the eKYC procedure using your Aadhar number. This will simplify the process as it pre-populates the form with your basic information and eliminates the need of a video call. However, it imposes a statutory investment limit of Rs 50,000 per annum per AMC.

Step 3: Start the SIP online – Once you are KYC compliant, you can visit the website of the fund house (AMC) in whose scheme you want to invest. Search for a ‘Register Now’ or a ‘New Investor’ link. It will prompt you to fill a simple form with your basic details, PAN number etc. and to choose a username and password for transacting online. It will also ask you to enter your bank account details to set up the SIP auto debit amount. Simply log in with the chosen username, password and select the scheme you wish to invest in. After making the first payment online, the next instalment of your SIP can be set up with after a gap of 15-30 days for which the AMC will show you the message on your computer screen.

Beginners guide to start an SIP investment

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