Mutual fund investments in India have seen huge interest in the past few years, and to further increase the participation, companies have lowered the minimum amount required to start a Systematic Investment Plan (SIP) to as low as Rs 100.
Recently, LIC Mutual Fund Asset Management Company (AMC) reduced the minimum Daily Systematic Investment Plan (SIP) amount to Rs 100. This change makes it easier for individuals to start investing in mutual funds with a minimal initial amount. Investors can now begin a SIP with Rs 100 and add further amounts in multiples of Re 1 for select schemes offered by LIC Mutual Fund (LIC MF). Additionally, LIC MF has introduced a Daily SIP option in its Liquid Fund, providing more opportunities for people to grow their money over time.
Such an initiative makes investing more accessible to a broader section of the population, particularly small-scale and first-time investors.
MAKING INVESTING ACCESSIBLE TO EVERYONE
Ranjan Kumar, CEO and Whole-Time Director at Zuari Finserv Limited, explained the rationale behind this change.
“Lowering the minimum SIP amount encourages small investors, especially first-time investors, to enter the financial market. Many individuals, particularly in rural or lower-income areas, may not have the funds or confidence to start investing with a higher amount. The reduced SIP minimum aligns with government initiatives like ‘Jan Dhan Yojana’ and other financial inclusion programs.”
A lower entry barrier allows people from different income levels, including students and young professionals, to start their investment journey. Kumar highlighted that even a small amount invested regularly could grow significantly over time, thanks to the power of compounding. He added that cautious investors may find the lower minimum appealing as it reduces the potential risk of loss during market downturns.
This change is expected to help promote disciplined investing. By offering SIPs starting at Rs 100, the goal is to encourage consistent, long-term investments. For those new to the market, this lower amount allows them to begin investing without feeling the pressure of committing larger sums.
“Reducing the minimum SIP amounts is like lowering the entry barrier into the world of investing. This approach helps build a habit of regular investing, allowing more people to participate in the market with limited funds. Through low SIP amounts, investors can take advantage of rupee cost averaging, making small but consistent contributions that accumulate over time,” said Research Team, Share India Securities Ltd.
MUTUAL FUNDS AS LONG-TERM WEALTH-BUILDING TOOL
By lowering the minimum SIP to Rs 100, fund houses are working to ensure that mutual funds are not just for high-net-worth individuals but also for those from all income groups.
Harsh Gahlaut, Co-founder and CEO of FinEdge, believes that this move will further the penetration of mutual funds across India.
“The idea is to make mutual funds an ideal investment avenue for not just high-net-worth investors but for investors from all income groups. Mutual funds have established themselves as a necessary tool for goal-based investing, helping people achieve their financial goals.”
SHORT-TERM vs LONG-TERM: WHAT SHOULD INVESTORS CONSIDER?
When it comes to deciding between short-term and long-term investments in mutual funds, experts suggest that it depends on an individual’s financial goals and risk tolerance.
Harsh Gahlaut highlighted the importance of “hyper-customisation,” stating that each investor’s journey should be personalised based on their unique objectives. “Every individual’s investing objectives and financial situation are unique. Hyper-customising an investor journey is crucial,” he said.
While mutual funds offer an affordable and convenient way to invest, Gahlaut stressed the need for investors to understand the risk attached to their investing horizon. Whether someone should invest for the short or long term depends on their specific goals and financial needs.
Investing for the long term allows individuals to benefit from market growth and compounding returns, but for those with short-term financial goals, a more conservative approach may be necessary. Regardless of the time frame, experts recommend that investors seek personalised advice to ensure their investments align with their goals.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)