How will you benefit from investing early in mutual funds?

Systematic Investment Plan or SIP is a great investment tool. Most people have heard about SIP but are not aware that investments can be made in as small amount as Rs 100.

SIP of only Rs 100 is called Micro-SIP. Most people put off investing in mutual funds due to lack of adequate money. Micro-SIP is the answer to that problem.

You can start investing in mutual funds for just Rs 100. A small amount won’t be a burden and individuals can easily allocate that amount.

There are more than 4.5 crore Demat account holders in the country. Out of these, 3.55 crore are SIP accounts. In a country with a population of around 130 crore, this number looks quite small. In 2011-2012, Asset Management Companies launched micro SIP schemes.

Mutual fund regulator Securities Exchange and Board of India had simplified KYC rules for those investing in these micro-SIPs. Investors can also invest in it without a PAN, but two conditions must be followed – the investment amount does not exceed Rs 50,000 in a financial year and an official identity card with name and address will have to be given. The KYC process has become easier after the introduction of Aadhaar cards.

According to Deepak Jain, Sales Head, Edelweiss Asset Management Limited, SIP investment of Rs 100 will not give big returns but it is a good launch pad.

At present, about 5-10% of the products offered by mutual funds are offering SIP schemes of Rs 100. There are large-cap, mid-cap and smallcap funds in the equity and debt categories. ICICI Prudential Blue Chip and Balanced Advantage Fund, Invesco’s Large Cap Fund and Corporate Bond Fund, Nippon India’s Growth Fund, Index Fund (Nifty Plan) and Liquid Fund, Aditya Birla Sun Life’s Low Duration Fund and Edelweiss Large Cap Fund have schemes which give individuals this facility.

SBI account holders can also invest in SBI MF for Rs 100.

Pankaj Mathpal, founder of Optima Money Managers, said the Association of Mutual Funds of India (AMFI) and mutual fund AMCs should take steps to raise awareness about these schemes.

“Distributors probably will not sell it due to low margins and investment advisors do fee-based planning. So, those who take advice from investors will not invest in micro-SIPs,” he said.

(Disclaimer- KYC is essential in any financial scheme. If you also want to invest in micro-sip, then first do the research yourself and definitely ask for complete information from the company)