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

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

SBI bonds FAQ

  Maximum retail subscription and over – subscription There is a lot of excitement around these bonds, so I won't be surprised if they get over-subscribed on the first day itself. So, I thought Sameer asked a very good question about over-subscription. Here is that discussion. Here are some other questions that you may find useful. Can I trade the SBI bonds on NSE after it lists? Yes, these can be traded after listing. Where can I get the application forms, and can I buy the bonds online? You can get the application from notified branches, and then fill it up there and submit it. To the best of my knowledge, there is no way to invest in them online, but if anyone knows otherwise then please leave a message, and let us know. Can NRIs apply for these bonds? NRIs can't apply for these bonds as they fall under one of the ineligible categories. Can you take a loan by keeping the SBI bonds as security? The terms of the issue in the prospectus state that the bank shall no...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...
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