Since mutual funds are professionally managed and have a diverse portfolio, investing in them is sometimes seen to be safer than investing in the stock market. In the world of mutual funds, Systematic Investment Plans (SIPs) are common investment instruments that help people reach their financial goals at different stages of their life. Additionally, they support the development of disciplined investment practices, which facilitates long-term wealth creation.
Remarkable data from August 2024 shows that SIP contributions have increased significantly, hitting a record level of Rs 23,547 crore. Furthermore, SIP assets increased by 2.3% to reach Rs 13.39 lakh billion. With a net monthly addition of 27.40 lakh accounts, the number of SIP accounts has topped 9.61 crore, demonstrating the broad acceptance and use of SIPs in the investing landscape.
In order to serve a wider range of investors, the Securities and Exchange Board of India (SEBI) has announced that it will issue mini Systematic Investment Plans (SIPs). The purpose of these micro SIPs is to allow people to invest a minimum of Rs 250 every month. With this project, the investing landscape will be expanded to encompass those with lower incomes, such as homemakers, older persons with little financial resources, and daily wage labourers. Micro SIPs aim to increase financial inclusion and stimulate savings and investments across a broader population by reducing the entrance barrier.
Because that is what we do in India, the Rs 250 SIP will not only be genuinely, enormously beneficial for industry, but we will also witness financial inclusion in addition to increasing profitability. The secret to our goods’ enchantment is their schematization; SBI MF will bring this to fruition, just as we have sanitized versions of FMCG products. The goal is to open up opportunities for capital development and include individuals in the nation’s wealth creation,” Madhabi Puri Buch, the head of Sebi, stated in July.
Throughout time, consistent small-scale investments may have a big influence on your financial portfolio. This implies that you can begin investing without waiting to obtain a sizable amount of money. For instance, putting Rs 250 per month for 25 years, or Rs 75,000, into a Micro SIP has the potential to grow to about Rs 6 lakh with an anticipated 14% annual return. When compared to the original investment, this sum may be useful for unforeseen costs or future demands like retirement.
Micro SIP is an excellent program to encourage further involvement from students, housekeepers, small investors, and other low-income groups. Additionally, it enables individuals to benefit from SIP features like rupee cost averaging and financial discipline. Additionally, this will support the investors in this segment’s greater financial inclusion. Due to their absence from the market, this group of investors has not yet benefited from SIP’s compounding potential. The majority of these investors make daily chit-fund investments in unorganised credit societies; as a result, their money will begin to flow into organised mutual funds. Additionally, if an annual investment is less than $50,000, SEBI has suggested that there won’t be a KYC need. This move will help encourage a higher inclusion rate of investors from this category, according to Nitin Rao, Head of Product and Preposition at Epsilon Money Mart.
Since SIPs may average out entry costs, they are unquestionably a good way to participate in equities markets since they lessen the impact of bad timing on lump sum contributions made during volatile market times. People, including those who are impoverished, can begin investing by committing to a monthly commitment of as little as Rs. 250.
This degree of affordability makes it possible for people to save money gradually and build a strong financial foundation to help them deal with unforeseen circumstances like losing their jobs, having medical crises, or retiring. Their older years may see more financial independence as a result of this financial resilience, which will lessen their reliance on social security or other meagre government programs.
“It is a good idea to lower the SIP amount since it would encourage more people to invest or perhaps introduce some investors to the mutual fund industry. However, it’s crucial to inform investors about how to connect their mutual fund investments to their objectives and to continue making monthly contributions. It’s OK as a starting point, but even if the Rs. 250 investment yields larger returns, its contribution to investors’ total finances would be little. Therefore, it is more crucial to educate people and connect mutual fund investments to financial objectives than it is to simply reduce the SIP amount, according to Harshad Chetanwala, Co-Founder of MyWealthGrowth.
Micro SIPs meet the unique demands of older individuals as well by enabling them to accomplish small financial goals. Additionally, by helping low-income groups establish and achieve realistic objectives for a variety of purposes, these efforts support the financial inclusion of these communities. Micro SIPs also help investors diversify their portfolios in order to handle unanticipated events and retirement planning, and they allow students to save money for both higher education and vocational training.
