Timing the stock market is not simple if you do not have the experience and knowledge. One way to earn higher returns is to choose equity-oriented mutual fund schemes. You may further opt for a Systematic Investment Plan (SIP) to follow a disciplined investment approach.
With an SIP, you invest a fixed sum at periodic intervals, monthly or quarterly in your chosen mutual fund scheme. This eliminates the need for you to time the market while ensuring compulsory savings.
Here are three beneficial tips for investing in SIP if you are a beginner.
1. Types of forms
When you apply for an SIP for the first time, you need to fill out two forms. First is the primary application form that requires basic information like name, contact number, residential address, and nomination. The other form is the SIP form where you provide details, such as the amount you want to invest and the periodicity of the investment.
2. Accuracy of signature
When you commence an SIP, you need to ensure the accuracy of your signature. Any error in your signature may delay the process by two or three months. Fund houses require at least 30 days to commence the SIP and to register the bank mandate. Therefore, any error or omission in the SIP form may result in a delay.
3. Selection of dates
You may choose from different dates provided by the fund houses to invest in the SIP. However, you must remember that the date is fixed during the entire duration. Therefore, it is advisable to choose a date depending on when you receive your salary. This will ensure there are no defaults on the installment.
When you start the SIP, the amount is fixed during the entire tenure. However, some funds allow you to use a top-up on the existing SIP at the end of a minimum duration. This flexibility is beneficial in some cases. For example, if you have a car loan that will be paid after six months, the additional cash may be moved to your SIP as a top-up to earn more returns.