Investing through Systematic Investment Plan (SIP) is a popular method of parking money in mutual funds and stocks.
Investing through a Systematic Investment Plan (SIP) is a popular method of parking money in mutual funds and stocks. However, it’s interesting to note that individuals who are first-time investors or are looking to invest small amounts regularly in cryptocurrencies can also choose the SIP route.
Some cryptocurrency exchanges and platforms allow this. Though, this is available only for some of the leading cryptocurrencies.
According to Archit Gupta, Founder and CEO of ClearTax, SIP in cryptocurrencies staggers the investment and helps one in lowering the cost of purchase.
"This is crucial in regard to cryptocurrency crashes in recent times," Gupta said.
Here are the steps to invest in cryptocurrency through SIP:
A first-time investor can sign up on the cryptocurrency platform
Step 2: He/she will have to set a passcode after a successful registration
Step 3: Then, the investor will be required to complete KYC (Know Your Customer) by uploading identity and address proof copies along with bank account details and passport size photographs
Step 4: He/she can opt for the cryptocurrency of choice and then select the frequency such as daily, weekly or monthly, and the investment amount for the SIP.
However, it’s crucial to understand that cryptocurrencies are not legal tender in India. There are significant uncertainties about cryptocurrencies, Gupta said, as the RBI has time and again warned investors against holding them.
Also read | Shiba Inu versus Dogecoin: Key things to know before investing in these cryptocurrencies
“Moreover, cryptocurrencies are highly volatile, with drastic fluctuation in prices within days. So, investors should exercise extreme caution before investing their life savings in cryptocurrencies,” Mehta warned.
Still, investing in cryptocurrencies via SIP may be a preferred route, Mehta opined, as with this an individual can spread his/her investments and average out the purchase costs over time.
Platforms allow investors to start SIPs in cryptocurrencies with just Rs 100-Rs 500 per installment.
The current trend shows, Mehta said, that many investors opt for the daily SIP over the weekly or monthly option as the price of cryptocurrencies fluctuates heavily within a timeline of one month.
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