To widen the base of individual investors to opt for mutual funds as an investment option, the SEBI chairman, at an event organised by SBI Mutual Fund, said that micro SIPs will soon be launched in India. These micro SIPs in mutual funds can be started for as little as Rs 250 per month.
Essentially, this new idea of SIP is in tune with the larger objective of making a range of stocks and bonds available to a wider population at a reasonable price.
Moreover, the mutual fund route will enable an investor to invest his hard-earned money in different asset classes, which would otherwise be a complex exercise for a beginner. Typically, mutual funds or asset management companies pool the funds of different investors and based on the overall market momentum, allocate their money in different assets.
Thus, as mutual funds become more affordable, more people will be able to reap the benefits of professional fund management as well as diversified portfolios comprising different assets in the overall asset mix.
Should investors opt for Micro SIPs?
Nitin Rao, Head of Products and Prepositions at Epsilon Money Mart, believes that Micro SIP is a good initiative to boost participation of small investors, students, household employees and other low-income groups. It also serves to help them experience the advantages of SIP such as rupee cost averaging, financial discipline, etc.
This will also help in expanding financial inclusion for this segment of investors, Rao added.
Harshad Chetanwala, co-founder of MyWealthGrowth, said reducing the SIP amount is a good thing and can help more investors invest or even get a segment of investors to try out how mutual funds work.
But the key is to educate investors to link their mutual fund investments with their goals and continue to contribute regularly, Chetanwals added.
However, Chetanwala believes that educating and linking mutual fund investment with financial goals is more important than simply reducing the SIP amount.
Rao added that most of the investors have been staying out of the market and have not experienced the power of compounding that comes with SIP. Most of these investors make mutual funds, daily investments in unorganised credit societies, with this move their investment will start flowing into organised mutual funds. SEBI has also hinted that there will be no KYC requirement if the annual investment is less than 50,000, this move will also support greater inclusion of investors from this group, Rao added.
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