How to start an SIP investment online – Explained!

Systematic Investment Plans, or SIPs, have brought about a change in the way of investing in mutual funds, offering investors a disciplined approach to building their portfolio for long-term wealth creation. An SIP offers an opportunity to invest even with limited earnings and access growth potential with an added benefit of rupee cost averaging, which balances out the impact of market fluctuations on your portfolio over time. Moreover, with several online platforms, setting up an SIP is simpler, secure, and convenient. Read on to find out how you can start your SIP investment online, from setting out your goals to completing the process online.

Step 1: Make financial goals and form timelines

Your goals with an SIP investment may include saving for retirement, buying a house, or planning children’s higher education. Once you decide on your financial goals, create a timeline to get clarity on how much money needs to be set aside regularly to reach that target.

For example, if you want to save for retirement in 25 years, you may consider a 25-year SIP plan whose returns match your timeline and risk tolerance level. Take note that the longer your timeline, the higher your returns due to the power of compounding and rupee cost-averaging approach.

Step 2: Evaluate your risk tolerance

Different types of investments come with different risk levels; thus, before you invest in SIP plans, assess how much risk you can take on with your portfolio. Generally, investors fall into one of three different risk profiles: aggressive, moderate, or conservative.

An aggressive investor is willing to take on more risk while they strive for higher returns. A moderate investor typically falls somewhere between aggressive and conservative investors and seeks to balance potential returns and risk. A conservative investor may prefer lower-risk investments with steady returns but less volatility than higher-risk investments.

Step 3: Use an online SIP calculator to project returns and compare different SIP plans

An SIP calculator is a free to use tool which helps you project your estimated returns with factors such as current interest rate, frequency, and total investment amount taken into account. This enables you to compare different SIP plans with their returns and find the most appropriate one with flexible instalments.

Step 4: Start your SIP online

Now open an account on the selected platform to start investing in an SIP online. Usually, this involves providing personal information such as name, address, contact number, etc., along with KYC documents like PAN or Aadhaar and bank details. After submitting these documents, you may receive confirmation via email or SMS that your account has been opened successfully. After that,

  • Visit the website of the financial institution or mutual fund house and log in to your account. You can also use a mutual fund investment
  • Go to mutual funds sections.
  • Browse different funds and select one after careful analysis.
  • Choose your tenure (10 years, 15 years, etc.).
  • Select SIP as an investment method.
  • Enter the investment amount and the frequency of payments.
  • You can enable auto debit for your SIP instalments from your bank account. Once done, your SIP investment may start after a few days.

An SIP offers you a systematic approach to planning your financial future with small investments and a disciplined approach. Plus, it eliminates timing the market and offers diversification with every new instalment you make. However, before investing in SIPs, selecting the right investment amount as per your goals, current savings, and expenses is important. This is because if you invest too much, you could find yourself in financial trouble in the future when unexpected expenses arise. And if you invest too little, you may not achieve your desired results.