How to start your first SIP

A Systematic Investment Plan (SIP) is an instruction to invest a fixed amount in a scheme on a fixed date each month. Setting your first one up comes down to four steps in order: complete your KYC, choose the scheme and amount, set up the auto-debit mandate, and pick a date. After that the instalment runs on its own. Here is each step and what actually happens on the first debit.

Step 1: complete your KYC

KYC — Know Your Customer — is the one-time identity check you do before your first mutual fund investment, and nothing can be bought until it is done. It uses your PAN and an identity and address proof (often the Aadhaar) and, once complete, works across every fund house. If you have never invested before, this is the step that takes the longest, so it is worth finishing first. Our guide to completing your KYC and the list of what you need to start cover it in full.

Step 2: choose the scheme and the amount

Next you decide which scheme to invest in and how much to put in each month. The amount matters less at the start than the habit: a figure you can sustain through a bad month is better than an ambitious one you have to stop. Sizing it to your goal rather than to what is left over is the subject of setting a financial goal, and the SIP calculator lets you see how different monthly amounts add up over time — arithmetic on your own figures, not a forecast.

Step 3: set up the auto-debit mandate (NACH)

An SIP runs on a mandate: a standing instruction that lets the fund collect your instalment from your bank account automatically each month. In India this usually runs on NACH — the National Automated Clearing House — the same system behind most recurring bank debits. You approve the mandate once, setting a maximum amount it may debit, and it then authorises each monthly instalment without you having to act. Registering the mandate with your bank takes a few working days, which is why the first debit is not always immediate.

Step 4: pick a date

You choose which day of the month the instalment is taken. Pick a date shortly after your salary usually arrives, so the money is in the account when the debit runs. Beyond that, the exact day makes very little difference to the long-run result — an SIP is designed so the day you pick is not a decision you need to agonise over.

What happens on the first debit

On your chosen date, the mandate debits your bank account and the money is sent to the scheme. The units you receive are your instalment divided by that day’s NAV, and which day’s NAV you get depends on when the money reaches the fund relative to the daily cut-off time — though for an SIP the mandate handles that timing for you. From the second month on, the same thing happens automatically, and units simply accumulate in your folio.

After it is running

An SIP is not a lock: you can pause it, change the amount, or stop it, and you can raise it over time with a step-up SIP so it keeps pace with your income. The one thing that makes an SIP work is leaving it running through the ups and downs rather than starting and stopping with the headlines. If you would like a hand with the setup itself — the mandate, the paperwork, getting the first instalment right — that is the sort of thing we help with.