How must I start investing via a SIP? Do I need a demat account? The maximum I can invest is Rs 2,000. Please suggest an equity fund.
An SIP is the most convenient and efficient way to invest in a mutual fund. SIP is an acronym for Systematic Investment Plan. That means you invest fixed amounts at pre-determined periods in your mutual fund. Depending on the net asset value (NAV) on the date of your purchase, you will get units assigned to you. The three types available are: Quarterly SIP (invest in units once in 3 months), monthly SIP (every month) and daily SIP (every day).
You can approach your distributor or the fund house directly. In the application form you will have to fill in your bank account details, the duration of the SIP, the SIP amount and the date and frequency at which you want the SIP to be directly debited from your account into the mutual fund. It will then be automatically done.
You do not need a demat account unless you buy the fund from the stock exchange via a broker. Equity funds fall under various categories, depending on the type of stocks that fill their portfolios. Since we are not aware of your investment preference, we will stick to large-cap funds. These are funds that have the bulk of their portfolio in large-cap stocks. You can invest in either one of the funds or pick up two (Rs 1,000 in each).