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Mutual Funds: Things You Must Know When Signing a SIP Form

May 27, 2022

Mutual Funds: Things You Must Know When Signing a SIP Form

A Systematic Investment Plan (SIP) is a popular investment vehicle offered by mutual funds. It’s easy on the pocket and capable of providing high ROI. However, a lot of investors don’t learn about the scheme they are investing in and just sign on the dotted line to complete the paperwork.

The following are some of the most important things you should understand about SIP when signing the form:

1. Personal Details

You should make sure that your name, email address, mobile number, etc. on the form are correct. This is so that you get your SIP updates on time without any problems.

2. Investment Details

This is perhaps the most important section of the form which you should double-check. Basically, you want to check the following:

Plan option: In most cases, you get three options in a SIP scheme. If you choose the dividend option, then you can receive regular payouts.

If you choose the growth option, then you can have your investment capital appreciated over time.

However, if you choose the dividend re-investment option, then instead of receiving the payouts, you can reinvest the same into the scheme to enjoy higher returns in the future.

Investment Frequency: This pertains to your investment frequency. Although many people think that you can invest only on a monthly basis, you can actually choose the frequency to be weekly, quarterly, or even half-yearly.

Investment Period: You are free to choose the number of years for which you want to continue investing in SIP.
In fact, even if the given period is over, your investment will continue earning compounding interest until you exit from the scheme.

3. Bank Account and DEMAT Details

Your SIP investment amount is automatically deducted from your bank account through Electronic Clearing Service (ECS). So, make sure that the account you link has enough funds to cover the withdrawals as per the chosen frequency.

It’s not necessary to share your DEMAT account details as you can invest through a broker too. However, if you do want to invest in SIP with your DEMAT account then you should verify the details before signing the form.

4. Final Step: Declaration & Signature

Once you followed the above steps, the final step is to sign the form. Before you sign the form, you must take advice from your financial advisor and later submit it to the Asset Management Company (AMC) for the final processing of your investment.

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