Rs. 100 SIPs per Month: Minimum Investment Plans for Mutual Funds
In this blog, we will discuss investing in mutual funds with Rs. 100 SIPs. If you want to start investing in mutual funds but do not have a significant sum of money to invest at a time, you can invest via SIPs. SIPs allow you to start your investment journey with an amount as low as Rs. 100 per month.
Furthermore, if you are a beginner or are doubtful of a particular mutual fund you wish to invest in, SIPs can be very helpful. You can invest as little as Rs. 100 monthly and slowly build up wealth with that particular fund.
What is an SIP?
An SIP (Systematic Investment Plan) is a way to invest in a mutual fund scheme of your choice with a small amount on a regular basis. If you choose to invest in mutual funds via SIPs, a certain sum is automatically taken out of your bank account each month and invested in the desired mutual fund scheme.
Most popular mutual funds allow people to invest via SIPs of Rs. 100 as an investment option. This makes investing in mutual funds more approachable for an average investor.
During tough market conditions, a SIP can be a blessing in disguise for the average investor. Investors can purchase more units at a discounted price. As a result, investors receive their units at a reduced average cost and more significant returns when the market situation improves.
The minimum SIP amount might be as little as Rs. 100, allowing as many individuals as possible to begin investing in mutual funds.
Minimum Amount You Can Invest via SIPs
The minimum amount you can invest in a mutual fund will vary from one fund house to another. For SIPs, nearly all fund houses allow a minimum investment amount of Rs. 500. Several fund houses allow you to invest as low as Rs. 100 with SIPs.
Later, when you are assured that a mutual fund scheme can give you higher returns, you may change the SIP amount to more than just Rs. 100 each month. This will let you grow wealth more rapidly.
The mutual fund industry has brought the micro-SIP revolution to rural India with Rs. 100 SIP mutual funds, enabling even a daily wage earner to invest in India’s share markets. Moreover, rupee cost averaging lowers the entire cost per unit further.
To enable even smaller investments than Rs.100, a mutual fund company recently reduced the minimum application amount for both fresh investments (previously Rs. 1000/Rs. 500) and additional investments (previously Rs. 100) to Rs 10.
How Do SIPs Work?
When you decide to invest in a mutual fund and opt for SIP as your mode of investment, the instalment goes towards purchasing units of the particular scheme. The prices of these fund’s units decide how many units you get to buy with the amount you have invested.
When you choose to invest via SIPs, you can take a call on how frequently you want to invest, whether weekly, monthly, quarterly or yearly. To start an SIP, you can give standing instructions to your bank, which will allow it to deduct the money automatically from your bank account and use it to purchase fund units.
When you choose to invest via SIPs, you don’t need to worry about timing the stock market because you will benefit from both the bear and bull phases. SIP allows you to buy more fund units when the market is down and less when it’s surging.
However, since the NAV (Net Asset Value) of a fund changes every day, the cost of fund units will differ for each SIP instalment. For instance, in one month, a fund unit can cost Rs. 100, and the following month it can cost Rs. 120. You will benefit from this because the purchase cost is presented in an average form over time. This benefit is known as rupee cost averaging, and it is only available if you invest via SIPs and not via lump sums.
Also Read: Step-up SIP : What is it and how to do it?
What Are the Different Types of SIPs?
The different types of SIPs that you will be offered while investing in mutual funds are:
- Top-Up SIP / Step-Up SIP
This type of SIP allows the investors to change the amount of SIP instalment at predetermined intervals. Top-up SIPs or Step-Up SIPs allow investors to increase the amount whenever their income rises and enables them to fulfil their goals faster.
For example, investor A has been investing Rs. 2000 each month in a top-performing equity fund but wants to increase the SIP amount now because his salary has increased. So, he can increase the amount to Rs. 2500 with the top-up SIP option.
- Perpetual SIP
When you invest in a mutual fund scheme, you generally have to invest for a fixed period of time. It can be 6 months, 3 years or 5 years and can extend up to 10 years. However, if you want to park your money under a scheme indefinitely, then you can opt for a perpetual SIP.
This type of SIP will allow you to keep investing your money in your choice of fund. But when you instruct your fund house to cease the investments, it will immediately stop.
- Flexible SIP
SIPs are known to be a recurring payment you must make to a fund house every month. But many investors may not be able to pay the same amount every month. In this case, you can use the flexible SIP option while investing.
Flexible SIP allows you to alter the amount of money you want to invest each month based on your cashflow for that month. If you are facing a financial crunch, you can also reduce the SIP amount and increase it when you have more money. This type of SIPs is suitable for entrepreneurs and freelance workers who do not earn the same amount each month.
What Are the Benefits of Investing via SIP?
You can choose to invest in any Rs. 100 SIP mutual fund as it offers many benefits. These are discussed in more detail below:
- Easy to invest- The SIP investment model simplifies your investment procedure in mutual funds. When you opt for SIP, the predetermined amount gets auto-debited from your bank account each month to the fund in time. You need to issue standing instructions with your bank branch for this to happen.
Furthermore, the fund house will offer you a summary of all the essential details in a transparent manner, making the task of monitoring your funds easier.
- Rupee cost averaging- Investors who invest in mutual funds via SIP do not have to worry about market conditions. SIP ensures that investors purchase fewer units when the market is surging and more units when the market is down.
This method is called rupee cost averaging, and it helps investors make relatively reasonable returns during both the bull and bear phases of the market.
- Helps with financial planning- SIPs are an ideal model for planning the goals for which you are investing. Let us say that investor B has goals to visit Switzerland with his family and buy his own house in 10 years. SIP will allow this investor to invest in different funds with different tenures, and he will end up fulfilling all those goals at the right time.
- Power of compounding- Historically, it has been seen that even if individuals invest an amount as small as Rs. 100 in mutual funds via SIPs, it will grow into a sizable amount after some time.
This happens because every investor earns interest on their investments, increasing every time. Hence, slowly the investor accumulates a more significant sum of money, usually double the amount from what he had initially invested. This is known as the power of compounding, as it leads to an increase in returns received.
How to Invest in Mutual Funds via SIP?
If you wish to invest through an SIP, you can start with as low as Rs. 100. Here is how you can invest in a mutual fund via an SIP:
Step 1: Fix your goals
If you have decided to invest in a mutual fund, you may have a dream you wish to fulfil, which is why you want to accumulate wealth. To be successful, you need to understand your short-term or long-term goals. This way, you will also be able to better define your financial goals.
For example, buying a Vespa is a short-term goal, but purchasing a house is a long-term goal. Once you have clearly defined your goals, you will then be able to decide on the amount of money you want to raise with the help of mutual fund investments.
Step 2: Select the suitable fund and SIP
After you have determined the kind of returns you are looking for, you should decide on the fund and the SIP that suit your needs. To choose a mutual fund, consider various factors like your goals, risk tolerance, financial status, and the time you are willing to stay invested. Based on these factors, you need to choose a mutual fund and an SIP plan.
Step 3: Complete your KYC
If you invest in a mutual fund scheme, you must complete a KYC verification procedure either directly with the AMC / advisor or with the agent / distributor/ broker you are utilising for making such investments. You must submit bank and Aadhaar card details to complete the process.
When Should One Start Investing in Mutual Funds via SIPs?
Fund managers and investors with a lot of experience suggest that people start investing via SIPs as soon as possible. Most mutual funds keep their minimum monthly investment at Rs. 100, making mutual funds accessible for even students in their 20s.
You can start investing in mutual funds with the help of SIP as soon as you earn money. People may begin investing for the following reasons:
- In their 20s to save up money as their income tends to be very low.
- People in their 30s generally have short-term goals like buying a car or saving up for their house down payment.
- In the 40s, people tend to invest in SIPs because they want to save up for their kids’ education or marriage.
How Are SIPs Different from the Lump Sum Investment Mode?
SIP and lump sum are the two standard modes of investment in mutual funds. They are different from each other in the following ways:
|Parameters||SIP Investment||Lump Sum Investment|
|Investment Amount||Investors can start investing in mutual funds as low as Rs. 100 every month. This is ideal for first-time investors or people with a meagre income.||In lump sum, the minimum amount for most MFs range from Rs.1000 to Rs. 5000 initially, a comparatively larger sum than in an SIP investment.|
|Investment Frequency||Periodically in a systematic manner.||One-time payment.|
|Investment Flexibility||SIPs offer high investment flexibility to investors.||The investment flexibility that lumpsum investments offer is very low.|
|Understanding of Market||If the investor chooses SIP investments, he/she will not have to worry about market conditions due to rupee cost averaging benefits.||Investors must carefully evaluate the latest market phase when they invest via lump sums.|
|Risk Appetite||Investors with low to moderate risk appetite can invest with SIP mutual funds.||People with a high appetite can invest in lump sum mutual fund schemes.|
SIP is a standard investment method that all mutual fund schemes in India offer to investors. It has become widely popular because it allows investors to invest small amounts of money monthly or quarterly and grow a large corpus over time. Many popular Rs. 100 SIP mutual funds are available in the market, so you can find one that suits your financial goals.
Frequently Asked Questions
What is the NAV of a mutual fund?
NAV is net asset value, calculated by dividing the market value of securities of a scheme by the total number of units of the scheme on a given date. After business hours, the exchanges regularly update every fund scheme’s NAV.
How to invest in ELSS through SIP?
Investors can incorporate SIP into an ELSS. An ELSS is an extremely popular investment option offering investors tax-saving benefits. These benefits are defined under Section 80C of the Income Tax act. If you invest in an ELSS, you will be eligible for tax deductions of Rs. 1,50,000 (maximum).
What is XIRR in SIP?
XIRR is a fund’s Extended Internal Rate of Return, and it is a method through which one can calculate his/her returns after making numerous transactions at different times. It is nothing but investors’ rate of returns based on the actual returns earned by their investments.
What is OTM in SIP?
OTM is a one-time mandate, and it is a banking process that simplifies the process of monthly SIP payments. You need to visit your bank and fill and sign an OTM form or you can use online platforms providing access to mutual fund investments which enable online OTMs to be completed without the requirement of any bank branch. By doing so, you are permitting the bank to deposit a fixed amount of money from your bank account towards the fund of your choice every month.