HOW TO INVEST IN SIPs?


How To Invest In Mutual Fund SIP

A SIP is a flexible and simple investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme.

How to Invest in SIP Online?

The following steps need to be followed to start investing in Mutual Fund SIP:

  1. A form with personal details such as name, address along with bank details needs to be filled.
  2. The investor needs to be compliant with the KYC (know your customer) norms before investing in Mutual Funds.
  3. After this, Mutual Funds can be shortlisted to invest in.
  4. Once this is done the investor has to fill in a Mutual Fund form with a supporting cheque
  5. The distinct form will be submitted to the respective Mutual fund house or at CAMS/Karvy centres.
  6. Once the form is processed and the cheque encashed, a statement will be sent to the mail address given or posted to the house address provided. Investors have the option to do this investment option by themselves by depositing the forms to the MF houses or making use of the services of a distributor.
  7. Mutual funds can be purchased either offline or online.
  8. Online mutual fund purchases have three options where the investor can buy MFs from
    • • online stock brokerage websites
    • • online mutual fund distributors
    • • Mutual Fund’s website

How to redeem your mutual fund?

One would also need to redeem their mutual fund units. To redeem means to buy back. It refers to the purchasing back of funds that were sold before. There is a simple method to redeem your mutual fund. All you have to do is fill an online or paper mutual fund redemption form which may be used for all MFs. CAMS acts as the Registrar and Transfer Agent. The form is available from the Mutual Fund’s AMC office. The mutual fund redemption form is easy to fill. You only need to fill in details such as your name, folio number and the number of units you want to redeem. After this is given to the CAMS processing assistant, your form will be put up for the request.

You are allocated a specific number of units based on the continuous market rate called NAV (Net Asset Value) for the day. Every time you spend money, more units of the scheme are acquired at the market rate and added to your account. Hence, units are purchased at different rates. The investors avail from Rupee-Cost Averaging and the Strength of Compounding.

Rupee-Cost Averaging

With volatile markets, most investors are skeptical about the best time to invest and try to ‘time’ their listing into the market. Rupee cost averaging enables you to opt out of the guessing game. Since you are a regular investor, your money carries more units when the price is low and lesser when the price is high. During the volatile period, it may allow you to get a lower average cost per unit.

Power of Compounding

The law for compounding is simple, you begin investing, the further time your money has to grow.

Example

If you began investing Rs. 10000 a month on your, in 20 years’ time you would have put apart Rs. 24 lakhs. If that investment is increased by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60.

But, if you started investing ten years earlier, your Rs. 10000 each month would sum up to Rs. 36 lakhs over 30 years. Considering the same average yearly growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday – more than double the value you would have received if you had begun ten years later.

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