Business News Desk – A huge amount can be generated by investing in mutual funds through SIP. Most fund houses in the country offer investors simple SIP plans to start with a minimum monthly investment of Rs 500 or Rs 1000. For investors who want to start SIP with a small amount to build a larger corpus and meet their financial goals, ‘Micro SIP’ (Micro-Systematic Investment Plan) can be a better option. In this, investors can raise a huge amount by making a minimum monthly investment of just Rs 100. What is Micro SIP? This can prove effective for small investors. What is the provision regarding KYC in Micro SIP? You can see complete information one by one here.
What is Micro SIP?
Micro SIP means investing small amounts in Systematic Instrument Plan (SIP). It is specially designed for those who want to start investing with less savings. Most of the fund houses in the country offer plans to start investing with a minimum of Rs 500 or Rs 1000, but some fund houses also allow investment with a minimum monthly amount of Rs 100. For example, under the offering of such fund houses, investors can start a micro SIP with just Rs 100 per month.
What is Micro SIP?
SIP is a method of investment. Through which the investor can choose to invest daily, monthly, quarterly in mutual funds according to his financial need or capacity. Due to this system of investing in mutual funds, the investor is able to invest his savings little by little instead of investing in a scheme at one go. The minimum or any amount can be fixed for monthly investment under that scheme. This is an easy and systematic way of investing in mutual funds. The biggest advantage of SIP is that it protects you from market fluctuations and gets you into the habit of investing regularly. The SIP investment method has gained immense popularity among Indian mutual fund investors due to the recent boom in the stock market.
No need for KYC in micro SIP: SEBI
A popular way to invest in mutual funds is SIP (Systematic Investment Plan). The Securities and Exchange Board of India (SEBI) is responsible for regulating mutual funds in India. It has made some important special rules for Micro SIP like minimum investment, KYC, so that even small investors can get a chance to invest in mutual funds. To make investing in mutual funds easier for small investors, SEBI has ensured that the KYC (Know Your Customer) process is not mandatory for micro SIP investments up to Rs 50,000 annually.
Benefits of Micro SIP
Micro SIP allows you to invest from just Rs 100 every month. This is a big advantage for those who are financially limited or who have not started investing yet.
Simplified KYC
KYC is not required for Micro SIP. Because the deposit amount does not exceed Rs 50,000 in a financial year. This makes it easier for people to start investing in mutual funds.
flexible investment
Micro SIPs are flexible. Investors can adjust it according to their financial need or capacity. This makes the investment process smooth and easy.
regular investment habit
Starting with a small investment helps you get into the habit of investing. When you invest regularly every month, it helps you maintain financial discipline.
Protection from market fluctuations
One advantage of investing in SIP is that you take advantage of the principle of cost averaging. When the market is down, you buy more units and when the market is up, you buy less units. This way, your total cost is averaged.
liquidity
You do not need to lock your money when you invest in SIP. You can withdraw your money as per the plan of the mutual fund. However, it is important to note that there may be a fixed period for investing in mutual funds.
Do you have to do this to build a bigger corpus?
When you invest Rs 100 every month, you may feel that it is such a small amount that it cannot actually turn into a big sum. But if you do this for a long time, you can create a big fund by doing this. Even if you invest just Rs 100 every month, if you do so regularly, this amount can turn into a huge corpus over time. For example, if you invest Rs 100 every month, you will have Rs 1,200 accumulated at the end of the year and if you do this for 200 years, your total investment will be Rs 24,000. If you add an average annual return of 12% in micro SIP, your total amount will become much bigger.
If an investor invests Rs 100 every month in Micro SIP for the next 20 years, then
Total investment amount in 20 years – Rs 24,000
Average interest: 12%
Estimated total interest earned – Rs 75,915
Total assets – Rs 99,914.79
On the other hand, if the investor keeps investing Rs 100 every month for 30 years, then
Investing in Micro SIP for the next 30 years
Total investment amount in 30 years – Rs 36,000
Average interest: 12%
Estimated total interest earned – Rs 3,16,991
Total assets – Rs 3,52,991
long term investment
The longer you keep your investments, the more likely it is that your wealth will grow. Despite market fluctuations, your total returns are likely to increase in the long run.
interest on interest
Your investment in mutual funds works not only on the principal amount but also on the interest earned on it. This means you can make more money over time.
keep increasing investment
When your income increases or when you have extra money, you can also increase your monthly SIP amount. This will increase your total amount even faster.
How to start Micro SIP?
Choose mutual fund
First of all, you need to choose a mutual fund scheme that supports micro SIPs. You should carefully compare different schemes and understand their performance, management charges and other important information. Micro SIP is a great option for those who want to start investing with a small amount. You can make a huge amount with just Rs 100 every month. Through this scheme, you can not only achieve your financial goals but also develop a healthy investment habit.
