How to start an SIP!

SIP, as stated in earlier posts, is one of the most popular ways to invest in mutual funds. Every month more than Rs. 8,000 crores is being invested in mutual funds via SIPs. The convenience of putting in amounts ranging from Rs. 500 per month to infinity has led more and more people to go for SIPs as its a good EMI where you pay a monthly installment and overtime your money grows. Investors ranging from new to seasoned investors opt for SIPs as a preferred investment mode.

Although SIP is a very popular mode of investment, the knowledge on how can a person start an SIP is limited. This post aims to make the readers aware of how can one start an SIP and what processes are followed in different methods to start one.

Physical Mode

Under the physical mode, the investor is required to sign on a physical form and give a cheque along with the application (canceled or filled with first installment details). The investor can also give the photocopy of the bank passbook/statement. Investor signatures are taken on the application form and the NACH Form, also known as the One Time Mandate (OTM form). The OTM form is presented in physical along with the bank proof to the bank which upon verification set up the facility and every month the money is debited from the account and mutual fund units are allotted to the investor.

It is advisable to fill a larger amount in the OTM as it can help in subsequent SIPs/lump sum investments in the same AMC.

eg. - In case the investor wants to start an SIP in Invesco India Contra Fund for Rs. 10,000, the debit mandate can be filled for Rs. 50,000. In future if the investor wants to start additional SIP in Invesco funds then there will be no need for another OTM form as the previously registered OTM will suffice. This will reduce the chances of rejection of OTM.

Online Mode

With a lot many investors having access to the internet, the online mode is gaining traction. The only prerequisite for online mode is that the investor should have access to net banking and should have a photo of the canceled cheque with their name pre-printed which needs to be uploaded during folio creation.

The online mode SIP can be applied for by investors themselves by logging on to any RTA (CAMS, Karvy, Franklin) portals or AMC websites and then filling all the relevant details like SIP amount, advisor details, etc. Otherwise, your advisor can send you a prefilled form in a link where the investor just needs to follow instructions and confirm the SIP.

The internet banking is used to register the mutual fund as a biller. As you register the SIP, a Unique Registration Number (URN) is mailed to the investor through which the investor needs to register on the bank website. The unique code acts as the investor confirmation of SIP and acts as a standing instruction to the bank to pay the amount on the presentment of the bill every month from the mutual fund side.

Below we mention the steps to register a biller from the bank website. Each bank will have a different interface but the steps remain broadly the same.
  •  Log in to your internet banking.
  • Choose "Bill Payment"
  • Click on "Add Biller" and choose "Mutual Fund".
  • Click on the mutual fund opted (Invesco as per our previous example)
  • Enter the URN number exactly as received. Note that a slight change in the URN will lead to the SIP not getting registered.
  • In limit section select "maximum amount" and in case the option isn't available then fill the amount of the SIP (10,000 as per our example)
  • Click finish and your biller is registered.

Online mode is convenient as it leads to less paperwork and chances of human error are minimized.

The above-mentioned ways can be opted to start an SIP. In case you want to know more then feel free to contact us at finriseinvestment@gmail.com or call us at +91-8568953926.

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