Lately, the concept of micro systematic investment plans (SIPs) or Pocket SIPs has gained traction among mutual fund investors.
Ever since Madhabi Buch, chairperson of the Securities Exchange Board of India (Sebi), talked about the sachetisation of mutual funds to cater to the growing and vast landscape of India’s mutual fund industry, fund houses are meeting up to the challenge – attracting more investors to the SIP base.
Joining the bandwagon, LIC Mutual Fund recently launched micro SIPs for its select schemes. The minimum daily SIP amount for LIC MFs has been reduced from Rs 300 to Rs 100, while the minimum monthly SIP amount has been lowered from Rs 1,000 to Rs 200.
This investment format has further opened the doors to the financial markets for many who previously may have felt excluded.
SIPs Breaking Its Previous Records!
The sachetisation of SIPs is happening at a great time when mutual funds are already becoming more popular with investors.
According to data released by the Association of Mutual Funds of India (Amfi), the industry trade body for mutual funds, as on November 11, 2024 the SIP book stood at Rs 25,322.74 crore in October 2024, an all-time high against Rs 24,509 crore in the previous month of September 2024. The number of SIP accounts stood at its highest ever at 101.2 million in October 2024 as compared to 98.7 million in September 2024.
Such record-breaking SIP inflows reflect a growing investor confidence and a shift towards disciplined, long-term wealth creation by more individuals.
Micro-SIPs: What Are They And Who Should Invest?
Pocket SIPs are the smaller and scaled-down version of regular SIPs. Their main attraction lies in the affordability aspect as they allow investments as small as Rs 100 daily or Rs 200 monthly. For daily wage earners, young professionals, or those hesitant to commit larger sums initially, micro SIPs serve as a stepping stone in the world of mutual funds.
R K Jha, managing director and CEO of LIC Mutual Fund highlighted the usefulness of micro SIPs for specific groups of investors, such as first-time investors and others.
First-Time Investors: For people who are new to mutual funds, micro SIPs can be a great entry point. “This is a very useful tool where first-time investors can start their SIP journey,” says Jha. Starting small builds confidence and eventually, investors can increase their investments as they gain more experience.
Daily Wage Earners: Those who earn a wage on a daily basis or individuals with irregular incomes can participate in the financial market through Micro SIPs. Since these would incur no major financial burden, they can begin building wealth one small step at a time.
Young Investors: Young professionals, who are still in college or just starting out with their jobs can start investing early on in their 20s and 30s. “This will help them develop a discipline of savings habit,” Jha said. He added that starting out early will help young investors accumulate a significant corpus over the long term.
How To Get Started With Micro SIPs?
Just like regular SIPs, one should keep a few aspects in mind for micro SIPs, too.
Choosing The Right Fund: One can look for mutual funds offering micro SIPs with low minimum investment requirements and strong historical performance.
Know Your Goals: A key rule of investing is to decide what you aim to achieve. Whether it’s creating an emergency fund, saving for a specific goal, or other long-term wealth accumulation.
Consistency Is the Key: Micro SIPs (or even the regular ones) are most effective when investments are made consistently. Make it a priority to continue with your contributions.
Monitor And Scale Up: You can review your investment performance periodically, and once you feel confident, gradually increase your SIP amount to accelerate your financial growth. To ensure that your returns are at par with growing inflation, a gradual increase in the SIP contribution will be a smart move.
SIPs Are For Long-Term Wealth Creation: Investors should know that the power of compounding works wonders over time, especially when Micro SIPs are continued for at least (if not more) 5-10 years. As Jha says, “The magic of compounding starts accumulating when the SIP runs for a good number of years.”
