5 steps to take before investing in SIPs

A Systematic Investment Plan (SIP) is a scheme offered by mutual fund companies. With SIP mutual funds,youcan invest a fixed amount periodically, i.e. weekly, monthly, quarterly or semi-annuallythrough instalments.

SIPs offer various advantages over lump sum investment method. Firstly, with a SIP, your money is not blocked for a long period as you invest at fixed intervals. Secondly, SIPs enable you to benefit from the power of compounding. And lastly, it helps you spread your risk by investing in different market cycles.

However, when you decide to invest in a SIP, you may want to consider the below-mentioned steps.

  • Complete KYC formalities

Being KYC compliant is the most important factor before starting with an investment through SIP. Below mentioned are the documents that you would require for your KYC formalities:

  • Pan card
  • Residential proof
  • Passport size photograph
  • Bank cheque book

You can complete the KYC process by visiting the website of the fund house and providing necessary information such as your name, date of birth, etc. You can upload the documents mentioned above, directly on the website.

  • Understand the objective of SIP investment and risk tolerance

Before investing, understand your financial goals to achieve them efficiently. You can allot different purposes to your finances, such as buying a new home, education, marriage, retirement, etc.

Analysing your risk tolerance can also give you clarity and perception before starting your SIP investments. Typically, when one nears retirement, financial obligations could increase, thus lowering one’s risk tolerance. On the other hand, when you are young, you have a higher risk tolerance and therefore can choose funds that offer higher returns.

  • Choose an appropriate SIP mutual fund

There are many mutual fund schemes availabletoday. However, the choice of a fund depends on the financial planning you wish to achieve and your risk tolerance. It is always advisable to look at the fund’s historical performance before selecting. On finalising the mutual fund investment company, you can follow the below-mentioned steps:

  • Fill up the application form
  • Fill up the ECS form for the online mode OR submit a cheque of the SIP amount for the offline mode
  • Submit a cancelled cheque
  • Submit proof of address
  • Fill up the KYC form
  • Select the date of SIP mutual fund

Under SIP, monthly instalmentsget auto-debited from your bank account. You can choose the date of deduction as per your convenience. Many mutual fund companies have fixed dates to pick from such as 1, 5, 10, 15, 20 and 28 of each month.

  • Choose the duration of your SIP Mutual Fund

Once you have chosen the appropriate SIP, you can calculate the SIP amount and returns that would be adequate for meeting your financial goals. Based on that, you can select the duration of your investment.


SIPs can prove to be a hassle-free mode of investment since the instalment amount getsdebited automatically from your bank account on the date chosen by you. Besides, it inculcates the habit of saving and investing.