When it comes to investing in mutual funds, the prominence of a systematic investment plan or SIP is well known. Over the last few years, a SIP investment has become synonymous with mutual fund investing. The popularity of SIPs today is such that both beginners and seasoned investors consider it an asset instead of just a tool to invest in mutual funds.

If you're a beginner in mutual fund SIP investing and wish to know all about it, this guide is for you. Here we cover everything that you need to know about SIPs.

What is a SIP?

A SIP is essentially a tool that allows an investor to regularly invest a fixed amount in a mutual fund scheme, usually an equity mutual fund scheme. The biggest advantage of SIP plans is that they allow you to enjoy the benefits of market volatility for a longer tenure.

What makes SIPs so popular is the ease and convenience of investing that it offers, thus enabling small investments over the long run with the potential to create long-term wealth for investors. Further, the flexibility to invest a sum as small as Rs 500 a month makes SIP affordable and offers many first-time mutual fund investors the option to better understand how mutual fund investing works. 

How Does a SIP Work? 

A SIP allows you to invest in a mutual fund to help you create wealth over the long term. It is important to note that here, generating returns is different from building wealth. Unlike investing in fixed deposits that only help you generate returns; a SIP helps create wealth. This amount gets automatically deducted from your bank account at a fixed interval (which you choose).

Top Benefits of Investing in SIPs

The main benefits of investing in a SIP include-

  • SIPs require a very small amount (as small as Rs 500) to begin with. This allows investors with even low income to take advantage of the stock market by investing in different mutual funds of their choice.
  • Investing in SIPs gives you the benefit of compounding and exponential growth over a period since the monthly returns received from SIPs get re-invested back to invested amount until maturity.
  • Unlike traditional investment options such as FDs and RDs, there is no penalty on most SIP schemes if you choose to stop investing in them at any given point in time.
  • The habit of investing in SIPs brings discipline to your savings and investments as it allows you to invest a fixed amount of money at regular intervals and take advantage of accumulated savings.
  • Finally, with SIP investments, you do not have to worry about timing the market and investing accordingly. 

How to Invest in SIPs?

Here is how you can start investing in SIP plans-

  • To begin with SIP investment, you need to first register your KYC.
  • You can do this online by registering yourself with a distributor or advisor.
  • Once done, you must register a bank mandate to facilitate the debit of a fixed amount to the selected fund. 
  • After both registrations are done, you can select any mutual fund for any period/ amount to start your SIP.

To Wrap up

A SIP is the best option for a safe, secure, and easy investment with less capital. PGIM is an excellent platform to start with if you want to create a SIP investment and reach your financial goals in a disciplined and hassle-free way.