How to Invest In Systematic Investment Plan (SIP)

As per mandate of SEBI, mutual fund houses or asset management companies (AMCs) are required to maintain representative offices throughout the country. You can visit any of these offices in-person and start investing via SIP in the mutual fund of your choice. AMCs also operate their own websites where you can register and conveniently start investing in SIP online. This route allows you to choose either the direct or regular plans of mutual fund as per your convenience. The limitation of this way to invest in SIP is that your choice of mutual funds is limited to only schemes offered by your chosen fund house.

An intermediary is a third-party individual or individual who facilitates your mutual fund investments. Typically, these entities are termed as distributors and you can invest in SIP or make lump sum investments in the mutual funds of your choice. Traditionally, mutual fund distributors only offered regular plans of mutual funds, with the emergence of online investment platforms, you can now opt for direct plans of mutual funds too. The main benefit of this model is that you can invest in mutual funds of multiple AMCs through this route, however, many intermediaries do charge an annual or monthly fee for their services. 

Registrar and Transfer Agent or RTA are SEBI-registered organizations that facilitate record maintenance for mutual fund houses. RTAs also have representative offices all over India and you can visit these offices in person to start making mutual fund investments. Alternatively, RTAs also operate websites that allow you to invest in SIP and via lump sum in multiple schemes. Currently, there are two RTAs operating in India – CAMS (Computer Age Management System) RTA and Karvy RTA. You can invest in CAMS-operated mutual funds at a CAMS RTA office or through their website. While Karvy-managed mutual fund investments can be made at a Karvy RTA office or via their website. You can opt to invest in either regular or direct plans of mutual funds through a RTA.

When you are participating in the financial market, you need to have a clear understanding of how much risk you are willing to tolerate. Risk tolerance or ability to take risk with your investment differs from one investor to another. Typically, younger investors with fewer financial responsibilities tend to have higher risk tolerance. Whereas, older individual with greater financial responsibilities tend to prefer lower risk investments.

Your financial goal whether it is to save for a new car or to ensure a comfortable retirement also has a bearing when you are choosing to invest in a mutual fund via SIP. You must know the reason behind why you are investing before choosing a specific option from various types of investments.

This is important because once you have the purpose clear, you can cherry pick the top performing funds and build a strong portfolio for yourself. For instance, for long-term goals like retirement, equity mutual funds are a suitable investment while for short term investment goals like saving for a holiday, debt schemes would probably be a better fit. 

As part of the process of how to invest in SIP, the fund schemes of your choice matter a lot. After all, they are the ones that will provide you with the return you want. So, you need to consider the past performance of the scheme when making your choice. Make sure you consider the long-term performance of the scheme when making the selection. While mutual fund returns might not be guaranteed, a fund with a proven track record can increase the chance of higher long term SIP returns for you. 

If you are learning how to invest in SIP, you will realize that one of the best things about SIP is that your funds will be deducted automatically from your account. You would not need to manually transfer the money from your own savings account to your SIP account. This transfer will happen on a particular date every month, this is known as a mandate transaction.

So, for this, you need to fix the date of the SIP. In addition to this, you also need to set the duration of your SIP. This will be on the basis of your financial goals. If you are having trouble deciding the duration, you can consult a financial advisor.

The above 3 factors are just a few of the many factors you could consider. Incorporating additional factors like investment strategy, fund manager credentials, scheme attributes, asset allocation, etc. can help you further improve your selection for making SIP investments.

The above format is specifically for the offline route. The online route is much more streamlined and with the introduction of Aadhaar-based OTP verification, you can complete the entire process without submission of any paper documents.