Micro SIPs: Getting Started With Mutual Fund Investments Was Never Easier

Recently, the Securities and Exchange Board of India (SEBI) has been working with mutual fund houses to introduce micro sips or systematic investment plans (SIPs) with as less as Rs 250 per month. Some fund houses allow you to start SIPs with Rs 500 a month, now. 

What Would Rs 250 Bucks Worth of SIPs Mean To The Investor? 

“SEBI and mutual fund houses are currently exploring if it is viable to introduce SIPs with smaller minimum investment amounts per SIP. The intent behind this move is financial inclusion,” says Gaurav Goel, SEBI registered Investment Advisor. 

While there is a growing trend of financialisation of savings amongst the Indian population, a huge chunk of citizens have not yet joined the bandwagon. As of 2023, only 8 per cent of the Indian population invested in mutual funds. This percentage is a fraction of 46 per cent of the population that invests in mutual funds in the USA.

“Investments in smaller investment size SIPs could potentially draw a large untapped population towards mutual funds. SIPs are a great way of investing in mutual funds. It instils discipline and creates long-term thinking amongst the investors. Micro SIPs would attract more people from the middle class and lower middle class to become comfortable with investments in mutual funds,” says Goel. 

“SIP is a good habit which most of the clients have experienced over the last many years. It has brought in a disciplined approach towards investing for your goals. The lower end of the pyramid who were deprived of this wonderful medium of investing can now participate. They can experience the power of compounding and rupee cost averaging,” says Nitin Rao, Head product and preposition, Epsilon Money Mart. 

The Magic Of SIPs

SIPs are a great way of investing in equity markets as they average out the cost of entry. This helps in avoiding poor timing of lump sum investments in case of an adverse market reaction in the short term. “Any such event can be a huge disappointment for a first-time investor especially for those coming from low-income backgrounds. In the long-term SIP’s give significant compounding benefits, and the small size of periodic investing ensures that people are comfortable paying them every month from their pocket without disturbing their lifestyle,” says Goel. 

Let us say that you started investing Rs 250 in SIPs every month 20 years ago. if we consider returns of 15 per cent, today the investment would be worth Rs 3.79 lakh. 

Be Aware of Risks 

“However, small investors should understand the risk of investing in equities before they kick start their journey in the world of equity investments,” warns Goel. 

In fact, mutual fund distributors have a very important role to play in taking this further with having face to face conversation with investors and explaining to them the risks and rewards associated with SIP investment in equity markets. “This can happen with more and more investor awareness programmes in small towns, villages, low-income groups and so on,” says Rao. 

In fact, those starting their jobs, who might be finding it difficult to save any money, especially if living in a big city, can always start the investing habit by starting SIPs with small amounts.