5 steps to take before investing in SIPs

A SIP or a systematic investment plan is a type of investment scheme which is offered by mutual fund companies. SIPs allow an investor to invest a small amount of money periodically into a selected mutual fund. Before an investor is planning to invest in SIP, they should understand what is a SIP and how to invest in SIP. Systematic Investment plans allows an investor to monitor a funds performance from time to time. SIP is beneficial since it allows an investor to invest in a fund through periodic installments.

When an investor is interested in understanding how to invest in SIP, they should consider taking the following steps:

  1. Understanding objective of investment and risk appetite:

Before getting into investing, an investor should understand how to invest in SIP. An investor should completely understand their risk tolerance before investing. In a lot of cases, greater the age and financial obligations, lower will be the risk tolerance. But, if an investor is looking for a high-risk tolerance, it will be important to understand why they want to invest. Investments help an individual meet their financial goals. Once the objective and motive for investments are clear to the investor, they will have the right state of mind for beginning with the investments.

  1. Choosing a mutual fund for investment:

An investor can choose from a wide range of mutual fund schemes which are available in the market. The selection of funds should be based on the risk appetite of the investors and their personal financial goals which they want to achieve through SIP investments. A fund’s performance in the past few years should be considered before investing in them. An investor will need to know how to invest in SIP so they will be able to choose the mutual fund.

  1. Deciding the date:

Under systematic investment planning, the funds will get auto-debited from the investors account, and it is necessary for an investor to choose a particular date where it is convenient for an investor to pay. However, an investor can choose different dates for a SIP instalment every month. Depending on an investor’s convenience, they can choose the date for amount deduction.

  1. Deciding the duration of SIP:

An investment in mutual fund through SIP is the best and the most convenient way of fulfilling the financial goals. An investor can calculate the SIP amount which will be required for meeting an investor’s financial goals. One of the biggest advantages of SIP is that it allows auto-debit of money from an investor’s accounts, so there is no need for manual money transfer to an investor’s SIP account.

  1. Stay invested till the end of the Investment period:

SIP’s are one of the best ways for creating wealth through long-term investments. An investor will not need to check the prices of mutual funds daily and not try to time the market every day. Once an investor understands how to invest in SIP there are a lot of benefits of investing through SIPs.

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