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Beginner's Guide

How to Start a SIP in Mutual Funds: Step by Step

Seven steps from KYC to your first instalment, and a flow diagram of what happens to your money every month.

October 4, 20266 min readBy Shivaani Mehrra

The 7 steps at a glance

  1. Complete your KYC once
  2. Write down the goal and when you'll need the money
  3. Pick a fund category, then one fund
  4. Choose the Direct plan and the Growth option
  5. Choose where to invest
  6. Set the amount and SIP date
  7. Approve the auto-debit mandate

Key Takeaways

  • KYC is a one-time step with PAN and Aadhaar; you don't need a demat account for mutual funds.
  • Pick the fund by goal and time horizon, then choose the Direct plan and Growth option.
  • Each month, the mandate debits your bank and units are allotted at that day's NAV.
  • Start with an amount you can sustain and step it up yearly; staying invested matters more than the start date.

1How to start a SIP: the 7 steps

Step 1

Complete your KYC once

You need a PAN, Aadhaar (or another address proof) and a bank account in your name. KYC is done once and works across every fund house. Most platforms do it online in a few minutes with an Aadhaar OTP and a selfie or video check.

Step 2

Write down the goal and when you'll need the money

"Retirement in 25 years" and "car in 3 years" need different funds. The time horizon decides how much equity you can hold. The 3-5-10 rule is a simple way to match the two.

Step 3

Pick a fund category, then one fund

For a first long-term SIP, a Nifty 50 index fund or a flexi cap fund is a common, simple start. Compare funds in a category on rolling returns and expense ratio on the best funds rankings, not on last year's return.

Step 4

Choose the Direct plan and the Growth option

Every fund has a Direct plan (no distributor commission) and a Regular plan. Direct costs less every year, and the gap compounds. Pick Growth over IDCW so returns stay invested. See direct vs regular and IDCW vs growth.

Step 5

Choose where to invest

You can start a SIP on the fund house's own website, on MF Central, or through an investment app. The fund and its NAV are the same everywhere. What changes is convenience, and whether you are being sold a Regular plan.

Step 6

Set the amount and SIP date

Many funds accept SIPs from ₹100–₹500 a month. Pick a date a few days after your salary arrives so the debit never bounces. Start with an amount you can keep paying in a bad month, and plan to step it up each year. The SIP calculator shows what a given amount can grow to.

Step 7

Approve the auto-debit mandate

Authorise the monthly debit through UPI AutoPay or a bank e-mandate (NACH). Approval can take a few days. Some platforms collect the first instalment immediately; others start on the next SIP date once the mandate is live.

2SIP flow diagram: what happens every month

Once the SIP is live, nothing more is needed from you. This is the cycle that runs on every SIP date:

SIP date

Your bank debits the SIP amount through the mandate

Money reaches the fund

The fund house receives your money (usually same or next working day)

Units allotted

You get units at the NAV of the day the money is realised

Confirmation

Units appear in your folio and in your monthly CAS statement

Repeat

Next month, the same amount buys more units if NAV fell, fewer if it rose

The last step is why SIPs work: a fixed amount automatically buys more units when markets fall. That is also why stopping a SIP in a downturn hurts. More on that in why you shouldn't stop your SIP.

3After you start: three habits that matter

  • Step it up yearly. Raising the SIP by 10% each year grows the final corpus far more than picking a slightly better fund.
  • Check once a year, not daily. Download your CAS statement (see the CAS download guide) and compare each fund with its category.
  • Measure with XIRR. A SIP's true return is its XIRR, not CAGR. The XIRR calculator explains why.

Sources & References

Frequently Asked Questions

Common questions about starting a SIP in India.

How do I start a SIP in mutual funds?

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Complete KYC with your PAN and Aadhaar, decide your goal and time horizon, pick a fund category and one fund, choose the Direct plan and Growth option, then set the monthly amount and date on the fund house's website, MF Central or an investment app. Finally, approve the UPI AutoPay or bank e-mandate so each instalment is debited automatically.

What is the minimum amount to start a SIP?

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Many funds accept a SIP from ₹100 to ₹500 a month; the exact minimum is listed on each fund's page and in its scheme document. A small start is fine. Increasing the amount each year (a step-up SIP) matters more than the first instalment.

How does a SIP work step by step?

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On your SIP date, the bank debits the amount through your mandate. The fund house receives the money and allots units at that day's NAV. The units show in your folio and your monthly CAS statement. The cycle repeats each month, buying more units when the NAV is low and fewer when it is high.

Can I start a SIP without a demat account?

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Yes. Mutual fund units can be held in a folio with the fund house, so you don't need a demat account. You only need completed KYC and a bank account.

Which date is best for a SIP?

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Over long periods, the SIP date makes almost no difference to returns. Choose a date a few days after your salary is credited so the debit never fails because of low balance.

Can I stop or pause a SIP later?

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Yes. You can pause or cancel a SIP at any time from the platform where you started it, with no penalty from the fund house. Units already bought stay invested. Exit loads apply only if you redeem units within the fund's exit-load period.
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FundSageAI is an analytics platform. Content on this blog is for educational purposes only and does not constitute financial advice. Always consult a SEBI-registered investment advisor for personalised recommendations.