Skip to main content

Mini-SIPs or Micro-SIPs

 

ONE of the developments in the mutual fund space has been the introduction of micro-SIPs (systematic investment plan). This is a way of investing for individuals and can be used to build a strong portfolio over a period of time.

The question that plagues many people is whether this route is useful for them and how they can actually benefit from the option provided by the mutual funds. Investors need to pay attention to this concept to ensure that they are making use of the alternatives available.


Meaning of term: The term micro SIP refers to a mode of investment into mutual funds. A SIP is a manner of investing whereby the investor puts in a fixed sum of money at a regular interval (usually a specified date each month) into the mutual fund.

This ensures that when the markets and the value of the fund are up the investor gets lower units while when they are down the allotment of units is higher leading to a situation where there is averaging out of the costs in the investment. Under a micro SIP the amount that is invested regularly is extremely low so that this is affordable for a larger number of people.


Minimum amount: The real benefit of the micro SIP comes due to the fact that there is a low minimum amount that is prescribed for the investment.

This means that the investor is able to begin their investment with a sum that is as low as Rs 50 or Rs 100 per month and this provides for the ease of investment because there are a lot of people who do not have large sums to in vest. Such people would want to start out small but they do not have the means to actually complete this requirement under a normal mutual fund offering.

Investors also need to understand some small difference in the minimum amount because in some cases the mutual fund says that the micro SIP amount is low like Rs 10 but this is per day and not per month.


Maximum limit: There is a maximum limit that is usually prescribed by the mutual funds for the micro SIP and this is more likely to be a figure that works on an annual basis. This could mean that a fund determines that a sum of investment that totals less than say Rs 40,000 or Rs 50,000 a year will be considered as a micro SIP .

This is essential because a lot of the investments under micro SIPs target a daily investment which can multiply to a large amount.


This kind of upper restriction also ensures that the daily wage earners as well as rural and semi-urban in vestors are the ones who take advantage of the micro SIP facility.


Usage: The usage of a particular facility has to be seen in the context of the position that investors are in. So the micro SIP is extremely useful for those who are starting out and have a lower amount to commit.

It is also useful for categories of people like students who would learn a lot by investing in this manner. Anyone who wants to ensure that there is a buildup of capital can start off using this option but this might not seem to be useful all the time for a person.

As time passes and the corpus rises the individual might want to ensure that they are investing larger amounts to reach their desired goals.

The individual also has to consider the paperwork and calculation in case they start too many micro SIPs especially if they have larger portfolio.

 

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...

Health for Wealth - How to buy Health Insurance ?

Tax Saving Mutual Funds Online Current open Infra Bond Application form   HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves. There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like: ■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan. ■ Buy a comprehensive health cover that fu lfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insuranc...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now