How To Start Your First SIP?

Hello Readers

Hope you're having a great week!

What's the first thing comes to your mind when you hear the word 'Finance'? Some might say 'Risk'; for others, it is 'Not our cup of tea'; for some, it is a piece of cake. 

For me, Finance is something that has always aroused my inquisitiveness. The stock market, Mutual Funds, Big Cap, Equity all these fancy words are enough to make anyone dive into it. 

Have you remembered the famous tv ad which says, 'Mutual funds are subject to market risks; read all scheme-related documents carefully' at a speed that even the class topper won't understand?  Pun intended >< 

So what is Mutual Fund? 

What is SIP, and how to start your first SIP?

A Mutual Fund is a pool of money managed by a fund manager who makes investments on your behalf and charges a fee. The money is invested in bonds, equities, and securities for the long term, and the investor is free to withdraw the amount whenever they want. Although it is preferred to invest the amount for more than a year or so to avoid the exit load. 

Now let's understand What SIP is 

SIP stands for Systematic Investment Plan, where one can invest a fixed amount in Mutual Fund Scheme at a fixed time interval. Say once every month. 

In layman's terms, one can invest in mutual funds via SIP. 

How to start a SIP?

1. Understand yourself

Here I am particularly talking about college students. Many of us have the mentality that we don't take any money from our parents and only begin investing after making money. I wholeheartedly concur with this viewpoint, but the earlier, the better.

Develop the habit of saving at least 1000–2000 rupees each month to invest. By doing so, you'll be able to reduce unnecessary spending and cultivate a saving mindset.

2. Find a broker 

In the financial world, the broker acts the same way as in the real world. When you have to look for a flat, you usually contact a broker who helps establish contact between you and the flat owner and charges a commission for the work. 

Stock brokers like Groww and Zerodha operate under the same principles in the financial sector. The investor chooses a fund on the broker's website and invests money there, that money gets transferred to the fund manager, who invests it on the investor's behalf, and the broker charges some amount for it. 

3. Documents are important. 

We have already talked about the broker, but how the broker knows you are a verified person? For this, KYC comes into the picture. KYC stands for Know Your Customer. It is a norm that verifies the customer's identity to safeguard financial institutions against fraud and corruption. KYC is usually done through banks and requires government-authorized documents for verification. E.g., PAN Card, Adhar Card, Passport, etc. 

4. Demat Account? Huh

We all are familiar with the concept of an ordinary Bank Account that holds all our savings. Hey, but what is a Demat Account?

A Demat Account is an electronic account that holds all the shares and securities. To start investing, you must have to open a Demat Account on the broker's website

Now, if I have to summarise the whole process, it sounds like

1. Get the KYC done 

2. Finalize your broker 

3. Open a Demat account with them 

4. Chose the fund best suited for you 

5. Invest in it, and you are good to go 

Congratulations!! Now you are one more step closer to attaining

financial independence. 

Do something today that your future self will thank you for – Sean Patrick Flanery 

See you in the next newsletter. 

Bis Dann

Tada

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Cheers!!