How to Invest In SIP (Systematic Investment Plan)?

Systematic Investment Plan (SIP) is a smart and disciplined way to put your money in investment options like mutual funds^^ or Unit Linked Insurance Plans (ULIPs) at a regular interval. Let us explore multiple aspects of investing through SIP in detail.

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SIP Benefits
Start SIP with as low as ₹1000
Start SIP with as low as ₹1000
No hidden charges
No hidden charges
Save upto ₹46,800 in Tax
Save upto ₹46,800 in Taxunder section 80 C
Zero LTCG Tax
Zero LTCG Tax^ (Unlike 10% in Mutual Funds)
Disciplined & worry-free investing
Disciplined & worry-free investing

  • Insurance Companies
  • Mutual Funds
Returns
Fund Name 3 Years 5 Years 10 Years
Top 200 Fund Tata AIA 23.15% 27.3%
19.47%
View Plan
Virtue II PNB Metlife 21.78% 23.76%
17.76%
View Plan
Pure Equity Birla Sun Life 18.83% 19.17%
16.34%
View Plan
Growth Opportunities Plus Fund Bharti AXA 17.85% 18.97%
15.65%
View Plan
Pure Stock Fund Bajaj Allianz 17.49% 18.39%
15.52%
View Plan
Blue Chip Fund HDFC Standard 14.09% 14.83%
12.85%
View Plan
Growth Super Fund Max Life 14.38% 15.26%
12.72%
View Plan
Multi Cap Growth Fund ICICI Prudential 15.63% 13.98%
12.51%
View Plan
Equity Fund SBI 14.73% 14.91%
12.42%
View Plan
Growth Plus Fund Canara HSBC Oriental Bank 12.78% 12.27%
10.7%
View Plan

Updated as on February 2024

Compare more funds

  Returns
Fund Name 3 Years 5 Years 10 Years
Active Fund QUANT 24.92% 31.48%
21.87%
Flexi Cap Fund PARAG PARIKH 20.69% 26.41%
19.28%
Large and Mid-Cap Fund EDELWEISS 22.34% 24.29%
17.94%
Equity Opportunities Fund KOTAK 24.64% 25.01%
19.45%
Large and Midcap Fund MIRAE ASSET 19.74% 24.32%
22.50%
Flexi Cap Fund PGIM INDIA 14.75% 23.39%
-
Flexi Cap Fund DSP 18.41% 22.33%
16.91%
Emerging Equities Fund CANARA ROBECO 20.05% 21.80%
15.92%
Focused fund SUNDARAM 18.27% 18.22%
16.55%

Updated as of June 2024

Compare more funds

What is a Systematic Investment Plan?

SIP is a disciplined way to invest in investment options like ULIP or mutual fund schemes over a specific tenure. The small amounts of SIP investment accumulated over a certain duration help you build a large corpus for future needs.

You can also opt for the auto-debit facility wherein the SIP amount gets automatically deducted from your bank account. Further, it helps you develop a savings habit in the long run.

Step-by-Step Guide on How to Invest in SIP in India

The following list gives you a detailed and step-by-step guide on how to invest in SIP:

Step 1- Understand your Risk Appetite and the Objective of Investment

It is important to understand your risk appetite and investment goals before selecting any investment type. Higher risk may lead to higher returns but also increases the chance of loss. Define your objectives, whether saving for retirement, education, or other financial goals.

Step 2- Choose a Suitable Market Linked Fund

Select funds that align with your risk profile and financial goals. Consider factors such as:

  • Past performance

  • Fund type

  • Expense ratio

Step 3- Select the Date of SIP

Under the Systematic Investment Plan (SIP), upon selecting, your money gets auto-debited from your bank account. It is necessary to choose a particular date when it is convenient for you to pay. However, you can choose multiple dates for SIP instalment per month. 

Step 4- Decide on the Duration of SIP

Decide the duration of your SIP based on your financial goals. Use the online SIP calculator to estimate your maturity amount required to meet your objectives.

Step 5- Decide Between Offline or Online Investment

Decide whether to invest in SIPs through offline or online channels. However, online investing offers the convenience of auto-debit and eliminates manual transactions.

Step 6- Stay Invested for Long Term

Commit to staying invested for the entire investment period. SIPs are designed for long-term wealth creation, so avoid frequent monitoring of market fluctuations.

Step 7- Diversify Your SIP Investments

Opt for a diversified portfolio by investing in a mix of market-linked funds rather than concentrating on too many schemes. Consider a combination of large-cap, small- and mid-cap, and multi-cap funds for a balanced portfolio.

How to Start Investing in SIP Online?

Now that you know about how to invest in SIP in India, let us discuss 3 simple steps on how to start SIP investment online:

  1. Keep the Necessary Documents Handy

    In order to start an SIP, you simply need a handful of documents:

    • PAN card

    • Address Proof

    • Cheque book

    • Passport size Photograph

    • Address proof (copy of your Driving License, Utility Bill, or Bank Statement)

    You can open an SIP account online once you have these documents.

  2. Get Your KYC Done

    To invest in SIP online for investing in Mutual Funds and ULIP Funds, you must provide certain details:

    • Name

    • Date of Birth

    • Address

    • Mobile Number

    • KYC verification (Provide the required details, such as a soft copy of your PAN Card and Address Proof)

    This is just the one-time thing you need to do, and you are eligible to invest in multiple funds.

  3. Start Your SIP Online

    Once your KYC is successfully done for SIP investment in India, you need to do the following:

    • Visit the website of the fund house you wish to invest in

    • Look for the ‘Register’ or ‘New Investor’ link. 

    • Fill in the basic details when prompted

    • Create your Username and Password for online transactions.

Tips to Invest in SIP

How to invest in SIP in India is a big question when an individual starts investing. However, along with how to start SIP investment, it is also important to learn the key points to remember before investing in a chosen best SIP plan.

The following points or tips are advised by the investment experts to consider for investing in a SIP plan:

  • Invest At Least 50% into Equities: Investing half of the amount in equity-linked SIPs with the highest 5-year returns helps ensure a robust return on investment. 

  • Be Patient and Observe the Market Trends: As capital market investments are always associated with some risk or volatility, investments made in a hurry may affect your returns. 

  • Keep Invested for Longer Tenure: As market irregularities are corrected over a period, long term investments tend to fetch higher returns. 

  • Avoid Frequent Switching between Funds: Frequent switching between the assets of your ULIP plan or mutual funds whenever there is a dip in the market only increases the expenses. Moreover, it also reduces the overall return that your fund or plan is expected to earn.

  • Do not Exit from the SIP Plan in Between: Exiting midway generally leads to missing out on good market days that could have fetched a higher return. To do so, it is always advisable to understand how to invest in SIPs in India in detail.

  • Longer the Investment Period, Higher the Returns: As the capital market is mostly volatile, it is quite natural that your fund will experience both profit and loss. However, it evens out in the longer run, and returns are higher. 

  • Invest in a Balanced Portfolio: Investing in a balanced portfolio through Systematic Investment Plans (SIPs) helps reduce losses when the market is down. 

How to Set SIP Goals?

As we have discussed about how to invest in SIP in India, let us also understand how to set SIP goals: 

  1. Identify Your Goals:

    • Short-term (1-3 years): This could be a vacation, down payment on a gadget, or emergency fund.

    • Mid-term (4-7 years): This could be a vehicle purchase, home renovation, or child's education.

    • Long-term (7+ years): This could be retirement planning, a child's wedding, or wealth creation.

  2. Quantify Each Goal:

    • Determine the target amount needed for each goal.

    • Estimate the timeframe to achieve each goal.

  3. Consider Your Risk Appetite:

    • Understand your investment horizon and risk tolerance.

    • This will help you choose suitable market-linked funds for your SIP.

  4. Use a Goal-based SIP Calculator:

    • These calculators are available online or through financial institutions.

    • Input your goal amount, investment horizon, and expected return rate.

    • The calculator will suggest the monthly SIP amount needed to achieve your goal.

  5. Refine and Adjust:

    • Review your goals and SIP investments periodically.

    • Adjust your SIP amount as your income or financial situation changes.

  6. Market-Linked Assets Diversification: 

    • Diversification across asset classes is vital for better returns and risk management.

    • SIPs simplify diversification through a flexible investment approach.

  7. Link SIP Plan to Bank Account:

    • Linking SIP to your bank account allows for automatic fund debiting and investment.

    • This seamless process ensures efficient execution based on asset NAV.

  8. Thorough Research:

    • Before investing, conduct thorough research on market-linked funds.

    • Look for funds with a substantial corpus and a track record of at least 5 years.

    • Reputable fund houses like Reliance, HDFC, SBI, Birla Sun Life are preferable for investment.

    By keeping these goals in mind, you can make informed decisions and build a robust SIP portfolio tailored to your financial objectives and risk appetite.

How SIP Works?

Let us get to know how SIP works for a complete understanding of how to invest in SIP: 

  • Regular Investing: SIP develops a habit of regular saving and investing, regardless of short-term market fluctuations.

  • Rupee-Cost Averaging: By investing at fixed intervals, you purchase units at different NAVs (Net Asset Values), averaging out the cost per unit over time. This reduces the risk of investing a lump sum at a high point in the market cycle.

  • Compounding: Consistent investments over time allow returns to compound, significantly boosting your long-term corpus.

Below is an example of how a SIP works:

  • Say you decide to invest Rs. 1,000 every month in a mutual fund scheme through SIP.

  • On the first investment date, the NAV is Rs. 10, and you receive 100 units (1,000 / 10).

  • In the following month, if the NAV rises to Rs. 12, you'll still invest Rs. 1,000, but you'll receive fewer units (around 83.33 units).

  • This pattern continues, with the number of units you receive fluctuating based on the NAV.

Here, you might have got a slight idea about how to invest in SIP in India. Now, let us learn where to invest in the next section.

Where to Invest in SIP?

How to invest money in SIP is an important question. However, you must also know the best SIP plans in 2024 to invest your hard-earned money and gain high returns: 

SIP Scheme 3-year Returns 5-year Returns
Equity Mutual Funds
Quant Tax Plan 36.94% 21.3%
Quant Active Fund 33.51% 20.10%
Quant Mid Cap Fund 34.4% 20.03%
PGIM India Midcap Opportunities Fund 31.35% 18.65%
Parag Parikh Flexi Cap Fund 21.88% 17.17%
Tax Saving Mutual Funds
Canara Robeco Equity Tax Saver Fund 18.13% 15.77%
Kotak Tax Saver Fund 17.17% 14.12%
PGIM India ELSS Tax Saver Fund 20.17% 13.70%
Hybrid Mutual Funds
Quant Multi Asset Fund  30.24% 21.02%
Quant Absolute Fund 28.96% 18.38%
ICICI Prudential Multi Asset Fund 21.65% 16.65%
Kotak Multi Asset Allocator FoF-Dynamic Fund 19.98% 15.70% 
HDFC Balanced Advantage Fund 18.82% 12.20%
Debt Mutual Fund
ABSL Medium Term Fund 13.39% 8.58%
UTI Bond Fund   9.76% 4.36%
ICICI Prudential Short Term Fund 6.7% 7.76%
ULIP Plans
PNB MetLife- Met Smart One- Virtue II 19.50% 13.50%
PNB MetLife- Met Smart Platinum- Virtue II 19.50% 13.50%
Future Pension Advantage Plan- Future Pension Active 19.10% 13.20%
Bharti AXA Life- Future Secure Pension- Growth Opportunities Pension Plus 17.20% 12.90%
See More Plans

Disclaimer: Policy bazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer. Tax benefit is subject to changes in tax laws. *Standard T&C Apply

Benefits of SIP Investment

Systematic Investment Plan (SIP) offers you many benefits; a few of which are mentioned below: 

  • Disciplined Investing: SIPs encourage regular investing, fostering a disciplined approach by allowing you to contribute small amounts periodically.

  • Rupee Cost Averaging: SIPs enable buying more units when prices are low and fewer when high, reducing the impact of market volatility. 

  • Compounding: SIPs reinvest dividends and returns, harnessing the power of compounding to enhance capital growth over time significantly. 

  • Flexibility: You can start with small amounts and adjust contributions according to their financial goals, offering adaptability. 

  • Diversification: SIPs allow spreading investments across various asset classes, sectors, or regions, reducing risk by not relying on a single investment.

  • Professional Management: Managed by experienced fund managers, SIPs benefit from expert decision-making, potentially yielding better returns. 

  • Cost-effective: With lower transaction costs, SIPs are efficient for retail investors, making investing accessible and affordable.

  • Tax Benefits: Certain SIPs, like ELSS, offer tax benefits under specific tax sections, reducing overall tax liability and enhancing returns.

Wrapping It Up

I am sure that you must find it easy to learn how to invest in SIP online and how to open a SIP account. However, that is just the 2% part of SIP investment. To gain a large corpus from the highest returns SIP plans, one has to learn where to buy a SIP and what are the best mutual funds and ULIP plans that one can invest in.

FAQs

  • How do I start investing in SIP?

    Follow the steps mentioned below to learn how to invest in SIP plans:
    • Gather documents: Get your PAN card, address proof, and possibly a cancelled cheque for KYC.

    • Complete KYC: Fulfill KYC requirements online.

    • Choose a platform: Decide where to invest - directly with a fund house, through a broker, or via a robo-advisor.

    • Select SIP plan: Research market-linked funds based on goals and risk tolerance.

    • Decide investment amount and SIP date: Choose monthly investment and withdrawal date.

    • Start SIP: Fill the application form online or offline.

  • What are the benefits of SIP?

    SIP inculcates discipline, benefits from rupee-cost averaging, and helps you achieve long-term financial goals.
  • Do I need a lot of money to start an SIP?

    No, you can begin with a small amount, like Rs.500 per month.
  • What documents do I need to invest in SIP?

    You'll need KYC documents (PAN, address proof, etc.) and a Demat account (optional for some).

+For Mutual Fund midcap category Returns https://www.morningstar.in/tools/mutual-fund-category-performance.aspx & for Insurance midcap fund category Returns- https://www.morningstar.in/tools/insurance-fund-category-performance.aspx
*Past 10 Year annualised returns as on 01-12-2023
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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