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How to open an SIP Account? Requirements, Benefits, Tips and Guidance

sip account
sip account

What is SIP account?

When you have decided to invest in mutual funds, the next step which follows is the way in which investment can be made. You can either invest lump-sum money at any particular time or invest some amount weekly, monthly, quarterly which we call as Systematic Investment Plan(SIP).

In SIP, a fixed sum is deducted from the investor’s savings account and is parked towards the chosen mutual fund. 

You can either invest yourself or put the same on auto-debit mode wherein the amount will be deducted on a specified date at the start of the month.

It is important to make sure that you do not invest in too many funds. Ideally, only 3-4 funds should form part of your portfolio which has been providing consistent returns.

How to open SIP account?

If you are looking for more discipline in your investment habits, SIP’s can help you do that. It allows you to make small investments towards the mutual funds and also providing you with the convenience of investing amount as low as Rs. 500. 

Before you can actually start investing, you need to complete certain formalities in order for your SIP account to be operative. Below is the procedure involved in the same:

Know Your Customer(KYC) Formalities

The KYC process is the first step towards investing in mutual funds. It is usually a one time process wherein your personal details are verified by an Agency. Post this, you can start investing in any fund.

The KYC Registration Agency(KRA) will verify your name, address, office address, etc. This is mandatory for all investors. Below are the required details that need to be submitted/uploaded on the KYC portal:

Identity proof

  • PAN Card
  • Passport
  • Voter’s Identity Card
  • Aadhaar Card
  • Driving License

Address proof

  • Latest Utility Bills
  • Bank Statement
  • Letter from your employer

Copy of cancelled cheque of the bank account that you want to associate.

Passport-size photograph

Verification

Once you have the above documents, you can upload the same on the website of the fund house that provides e-KYC facilities by making a simple login.

In-person verification

Once the details are uploaded, an in-person verification is required to complete the entire process. Once the documents are verified, your KYC is done.

To make KYC simpler, you can also now complete the verification through Aadhar based e-KYC. This requires you to visit the KRA’s website and enter the basic details such as your name, contact details, PAN card details, etc. and enter the OTP send to your registered mobile number with UIDAI.

There are a few benefits of doing your KYC through Aadhar. Below are some of the benefits:

  • Lesser details required
  • Automatic data fetching from the UIDAI database if the registered mobile number is correct
  • No need for video verification call in such case
  • Lesser chances manual error

Once this verification is done, you can start investing.

Benefits of Opening SIP Account

If you are looking for financial discipline, SIP’s can help you to achieve the same. It allows you to invest a fixed amount in a particular month and enables you to track your investments conveniently.

Below are some of the benefits of opening a SIP account:

Convenience

You can start investing through SIP with an investment of amount as low as Rs. 500. You can create a SIP in 3-4 funds based on the returns over the years and follow a disciplined approach to invest the fixed amount monthly.

Published on March 19, 2020