Systematic Investment Plan (SIP) is an investment tool popular among mutual fund investors. The best part about SIPs is that you can invest in small amounts regularly to build wealth over the long term to meet different life goals. However, the most important question you could have in mind is how to start investing in SIPs.
Here are three steps you need to follow to open your SIP account online:
Step 1: Gather the necessary documents
When you are investing online, you need to have some basic documents in place. The documents include:
- Address proof (driver’s license, Aadhaar card, voter ID, etc.)
- PAN card
- Cancelled bank cheque for bank details
- Passport-size photograph
You can scan these documents and upload them on the mutual fund house’s website or mobile app.
Step 2: KYC compliance
KYC (Know Your Customer) compliance is important when investing online in mutual funds. This a one-time procedure where you need to provide basic information like mobile number, name, date of birth, and address.
There are two ways to complete your KYC when creating an SIP account online:
- Once all the details are uploaded, you can video call for in-person verification. Your KYC will be completed once the documents are verified through the call.
- If you don’t have time for a call, you opt for Aadhaar-based e-KYC. All you need to do is enter the basic details, and an OTP is sent to your mobile number. Through this, your data will be automatically fetched from the UIDAI database.
Note: e-KYC procedure permits investments up to only Rs 50,000 per mutual fund per year.
Step 3: Start investing
Once the KYC registration is complete, you can start investing in SIPs. As a new investor, you need to choose a username and password for all future transactions.
When you open a new SIP, you must enter your bank information and set standing instructions. This allows the fund house to automatically deduct the SIP amount set by you from your bank account on the frequency chosen by you. A one-time mandate is the best approach to do the same.
What is OTM?
An OTM (One-Time Mandate) is a one-time registration process to auto-debit money from your savings account and credit it to your mutual fund portfolio. You can provide this mandate for a fixed period or leave it valid until you want to cancel it.
Here are the benefits of registering with OTM:
- Fast and safe investment mode with minimal chances of payment failure.
- You don’t need to provide your bank details every time you buy or sell your SIPs.
- Auto payments are set at periodic intervals.
- No limit on the number of SIPs you can register.
So, when you plan to start investing in SIPs, keep these pointers in mind. Also, you can use an SIP calculator to analyse how much you need to invest to reach your financial goals. Goal-based investing works best with SIP mutual fund investments.