Generally, SIP is used for investing in mutual fund schemes. However, many brokerage firms are providing the facility of investing in shares through SIP through demat account to the customers. By investing in shares through SIP, the risk for the investor is reduced. Also, the market fluctuations have less impact on his investment.
You can invest in shares through SIP from your demat account. For this, you first have to open a demat account in a brokerage firm that offers SIP facility for investing in stocks. Then you have to set a fixed amount and frequency (such as monthly, quarterly). You have to monitor your portfolio regularly. You can adjust your investment if necessary. You will get good returns by making this investment for a long period.
Generally SIP is used to invest in mutual fund schemes. But, many brokers are offering SIP facility for investing in stocks. Instead of a lump sum investment in shares, it allows you to invest a fixed amount in a particular stock every month or every quarter. This reduces the risk for the investor. Also, the market fluctuations have less impact on his investment. When the price of the share falls, you get more stocks and when the price increases, fewer stocks are allotted.
This is how you can invest in shares through SIP using a demat account:
1. Open a demat account
First of all, you have to open a demat account in a brokerage company. For this, you have to provide some documents. These include ID proof, Aadhaar, PAN and bank account details. Big brokerage firms like Zerodha, ICICI Direct and HDFC Securities provide the facility of investing in stocks through SIP.
2. Select the stock for investment
After the demat account is opened, you have to select the stock in which you want to invest through SIP. You should choose a company whose performance is good. It has good growth potential. You can invest in more than one stock for diversification. You have to make this investment for a long period. The maximum benefit of investing through SIP is available only in long term investment.
3. Set up SIP
You have to log in to the brokerage firm’s platform and go to the SIP or investment section. Then you have to select the stock in which you want to invest. You can decide the SIP amount (eg Rs 1,000, 2000 per month) according to your investment capacity. Then you have to link your bank account. Then after checking the details, you have to confirm the SIP setup.
4. Option to increase SIP amount
If your financial situation allows you, you can increase your SIP amount from time to time. This will give you good returns in the long term. If you want, you can increase the number of shares in your SIP portfolio for diversification.
It is important to know these things before investing:
Transaction cost
You will have to pay some transaction fee in every installment of SIP. Apart from this, you will also have to pay brokerage fee.
Market risk
There is risk associated with investing in shares. Through SIP, you can gradually invest in shares with a small amount. But, the fall in the market will affect your investment.
Stock research
You will have to keep an eye on the shares in which you are investing through SIP. This will make it easier for you to estimate the return on your investment.
Tax rules
It is important to keep in mind that capital gains from investing in shares are taxable. Therefore, when you sell shares, you may have to pay tax on capital gains.
