How to Start SIP Investment [A Beginner’s Guide]

Have you got an idea to start investing through SIPs? Well, it’s an excellent idea to grow your wealth. However, it’s essential to have a basic understanding before starting your investment journey.

Starting an investment in SIPs involves only a few steps & you are ready to go! But making a wise investment decision involves many other steps. If you want to make wise decisions and avoid common mistakes, let’s get started!

What Is SIP Investment?

SIP (Systematic Investment Plan) is a popular investment method for investing small amounts of money regularly over a period of time. It is a great way to regularly invest your money in individual shares, mutual funds, bonds etc.

SIP investment is very popular among mutual fund investors. We will discuss below the steps to start SIP investment in mutual funds.

Steps To Start SIP Investment

You are only a few steps away from starting a SIP investment. Upon completing these simple yet important steps, you are ready to go. Here are the steps:

1. Determine Your Investment Goals

The very first step to starting a SIP investment is to clarify your investment goal. Ask yourself a question why are you investing? For wealth creation, to build an emergency fund or for retirement planning.

You must also assess your risk tolerance and define your investment horizon i.e. short-term or long-term. Having a clear investment goal helps you choose the best mutual fund for SIP that fits your requirements. It also assists you in informed and wise decision-making.

2. Choose A Mutual Fund For SIP

Once you have determined your investment goal, it’s time to choose a mutual fund for SIP that aligns with your goal. There are various types of mutual funds available in the market you can choose from.

Further Read: 4 Steps To Choose Best Mutual Fund For You

Choosing a suitable mutual fund can lower your efforts towards achieving your goal. This also helps reduce risks and increase the likelihood of achieving your desired outcome.

3. Select A SIP Amount

After you choose a suitable mutual fund, you should decide on your SIP amount. You can start small and increase it over time. You can determine your SIP amount with the help of this simple formula:

SIP amount = (Investment goal / Number of months) / Expected rate of monthly return

For example, let’s say you want to save Rs. 1,20,000 in 5 years (60 months) and you expect an annual return of 10% (0.83% monthly). Using the formula, the SIP amount would be:

SIP amount = (1,20,000 / 60) / 0.0083 SIP amount = Rs. 2,000

So, you can expect to receive Rs. 1,56,165 ( Investment: ₹1,20,000 + Returns: ₹36,165 ). at the end of 5 years if you invest Rs. 2,000 per month in a SIP with an expected annual return of 10%.

If you invest for 10 years, you can receive ₹4,13,104 ( Investment: ₹2,40,000 + Returns: ₹1,73,104 ).

SIP Investment & Returns

4. Open A SIP Account

The next step is to open a SIP account. You have two options to open a SIP account. Either you open it with AMC (Mutual Fund Company) or with a broker/agent. You will need to provide some personal information and the required documents for KYC purposes.

Sidenote! Investing through a mutual fund company is more cost-effective compared to investing through a broker due to the brokerage charges.

However, if you choose to invest through a broker, compare brokerage charges and choose the broker that offers competitive rates.

5. Start Investing

After setting up the account, you can start investing in the mutual fund of your choice through the SIP route which is one of the two routes in investing in mutual funds. The SIP amount will be deducted from your bank account on a regular basis on the decided date.

6. Monitor Your Investment

Monitoring is a crucial factor after you start investing. This will give an idea of the progress of your desired goals. It can also help make changes or modifications if required to achieve your investment goals.

Common Mistakes By Beginner SIP Investors

  1. Not Researching Well: It is most likely a mistake made by beginner SIP investors. Investors should research the mutual fund’s past performance, expense ratio & other key parameters before making a decision.
  2. Neglecting Fees & Charges: New investors make this mistake knowingly or unknowingly. They should pay close attention to account maintenance fees, brokerage charges, exit load and expense ratio.
  3. Investing in Too Many Funds: If you are a beginner, investing in too many funds can be overwhelming. It can reduce the potential for returns. It is best to start with one or two funds.
  4. Not Sticking To the Investment Plan: SIP investments are all about discipline. If you do not stick to the investment plan, you might not get the desired results. So, to achieve your financial goals, you need to be disciplined.
  5. Lack of Monitoring: Beginner SIP investors may neglect to review and monitor their investments regularly. It is important to monitor the performance of the fund to make the required changes to achieve your goals.


  1. How many ways are there to invest in SIP?

    There are mainly two ways to invest in SIPs.
    1. Direct Plans in which you invest directly through mutual fund companies.
    2. Regular Plans which involve investing through brokers or intermediaries.

  2. Which Plan is Safer?

    Both Direct and Regular plans are considered safe and regulated by the Securities and Exchange Board of India (SEBI). However, Investing through a direct plan may be considered safer.

  3. What if you skip an Installment?

    There is no penalty if you miss one or two instalments. At most, the mutual fund company would stop your SIP. But you can always start the same or a new SIP. Sometimes you will be charged a small fee.

  4. What is the minimum amount to start a SIP?

    You can start a SIP for as low as Rs.500 a month.

  5. Can I change the SIP Amount or Frequency?

    Yes, you can change your SIP amount and frequency at any time. Most mutual fund companies offer the flexibility to modify or stop SIPs at the investors’ convenience.

A commerce graduate turned a digital creator to follow his passion for writing and sharing useful & well-researched information that adds some value to people's lives.

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