It doesn’t protect you from the usual volatility attached to the equity markets. – This option of Rs 100 only gives you the flexibility of investments. Read the fine print carefully before you decide whether to jump in or stay out. What you need to knowĪs with all innovative announcements, you might get carried away and immediately begin investing in a Rs 100/ Rs 50 SIP. Of course, this doesn’t mean that a SIP investment amount should only be Rs 100 (or Rs 50) it only means that, if you wish, you can start with a SIP of as low as Rs 100 / Rs 50 every month. This not only ensures that a small investor with Rs 50/ Rs 100 a month can invest in mutual funds, it also gives her/ him a chance to increase the number of months/ years over which she/ he can invest in equity. Reliance Mutual Fund and ICICI Securities, for example, have reduced the minimum SIP amount to Rs 100 and Rs 50 respectively. Till now, the minimum amount an investor could have put in a SIP was Rs 500.īut mutual funds at looking at new strategies to get more people to invest. Moral of this story: Investing through a SIP scheme help you to get more units from the same amount of money than you would have got by investing a lump sum in the same mutual fund. What if you had invested the Rs 2,000 as a lump sum instead of spreading it across two months? You would have then got only 195 units (Rs 2,000 less the entry load of Rs 50 2.5 percent divided by Rs 10). This time, the number of units that you get will be Rs 975 / Rs 9, that is 108.33.Īt the end of two months, you have 205.83 units (108.33 + 97.5). Since you are in a SIP scheme, you will again be investing Rs 975 (after deducting entry load from Rs 1,000). Now say, after a month, the net asset value of your SIP scheme falls to Rs 9. Hence you get only 97.5 units (Rs 975 / Rs 10). This is the fee you pay for entering a new fund offer (the first time a mutual fund offers its units to the investing public) or, for that matter, any other scheme of a mutual fund.Īssuming a rate of entry load at 2.5 percent (this differs from scheme to scheme and company to company) on your initial investment of Rs 1,000, you pay Rs 25 as the load. If you are wondering why you have got only 97.5 units (and not 100 units) when you invested Rs 1,000, here’s the answer.Įvery mutual fund deducts some amount from your investments called an entry load. Say you invest Rs 1,000 in SIP X and get 97.5 units at the cost of Rs 10 per unit. This technique helps you average your cost of buying shares. Instead of investing all your savings at one shot, SIPs help you spread your investments over regular intervals. Such installments are called micro SIPs How SIPs workīefore we try to look into the pros and cons of micro-SIPs, let us first examine how SIPs work. In order to facilitate such small-ticket investments, Sebi has withdrawn the requirement of PAN for SIPs that do not exceed Rs. However, these investors may not have a PAN card or other documentation required for mutual fund investments. Many investors are keen to start SIPs of small amounts for their household helps, drivers or other small investors. With such schemes, Reliance Mutual Fund and ICICI Prudential Mutual Fund have taken the micro-SIP revolution to rural India, where even a daily wage earner can participate in India’s equity markets. Systematic investment plans that allow you to invest Rs 50 or Rs 100 every month in a mutual fund (small amounts compared to Rs 500 per month for the lowest priced SIPs that were available till now) are called micro-SIPs. A few months ago, would you have believed that investing in mutual funds would require just Rs 50? Well, Reliance Mutual Fund (Rs 100 per month SIP) and ICICI Prudential Mutual Fund (Rs 50 per month SIP) has just begun a new era of micro-SIPs.
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