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Micro Systematic Investment Plan (SIP) is an investment option that has been introduced by mutual fund companies to attract more investors. The concept of Micro SIP allows individuals to invest in mutual funds with smaller amounts at regular intervals.
What is Micro SIP in Mutual Funds?
Micro SIP is a variant of the traditional SIP. It allows investors to invest smaller amounts, sometimes as low as Rs. 100, at regular intervals. Micro SIP aims to help small investors who may not have large sums of money to invest in mutual funds, to start investing with smaller amounts. Micro SIPs can be beneficial for individuals with low incomes, students receiving pocket money, and even children. By saving just Rs 100 to Rs 500 each month, anyone can accumulate a substantial sum of money without straining their finances. Thus, micro SIPs are a practical investment option for a wide range of individuals.
Mutual Funds with Minimum Sip Amount Rs. 500
| Fund Name | 5 Year Returns | AUM |
| Quant Tax Saver Plan | 25.6% | Rs. 4924 Cr |
| Canara Robeco Equity Taxsaver fund | 17.2% | Rs. 6137 Cr |
| Mirae Asset Tax Saver Fund | 17.1% | Rs. 17985 Cr |
| Bank of India Tax Advantage Fund | 20.40% | Rs. 888 Cr |
| Union Tax saver ELSS Fund | 17.2% | Rs. 708 Cr |
SEBI Regulations for Investing in Micro SIP
The Securities and Exchange Board of India (SEBI) regulates the mutual fund industry in India. According to SEBI, mutual funds can offer Micro SIPs with a minimum investment amount of Rs. 100 and a maximum investment amount of Rs. 50,000. The investment frequency can be monthly, quarterly, or half-yearly. The investment amount and frequency can be changed or stopped at any time by the investor.
Features of Micro SIP in Mutual Funds
The following are the key features of Micro SIP in Mutual Funds:
- Low Investment Amount: Micro SIPs allow investors to start investing with a small amount, as low as Rs. 100. This feature is useful for small investors who may not have a large sum of money to invest.
- Flexibility: Investors can change the investment amount and frequency at any time, depending on their financial situation.
- Diversification: Investors can choose to invest in multiple mutual fund schemes, which helps to diversify their portfolio.
- Compounding: Investing regularly in Micro SIPs can help investors to take advantage of compounding, which helps to build a larger corpus over time.
Advantages of Micro SIP in Mutual Funds
The following are the advantages of Micro SIP in Mutual Funds:
- Low Cost: Micro SIPs have a lower investment amount, which means that investors can start investing with a smaller amount. This feature is beneficial for small investors who may not have a large sum of money to invest.
- Disciplined Investing: Micro SIPs encourage disciplined investing, as investors need to invest at regular intervals. This feature helps investors to avoid the temptation of timing the market.
- Diversification: Micro SIPs allow investors to invest in multiple mutual fund schemes, which helps to diversify their portfolio. This feature helps to reduce the risk of investing in a single scheme.
- Long-term Investment: Micro SIPs are suitable for long-term investment goals, such as retirement planning or purchasing a house. Investing regularly over a long period helps to build a larger corpus.
Things You Should Know Before Investing in a Micro SIP
The following are the things you should know before investing in a Micro SIP:
- Risk: Like all investments, mutual fund investments carry risk. Investors should understand the risks associated with mutual fund investments before investing in a Micro SIP.
- Returns: Mutual fund investments do not guarantee returns. The returns are dependent on the performance of the underlying securities.
- Fund Selection: Investors should select the mutual fund scheme carefully based on their investment goals, risk profile, and investment horizon.
- Charges: Mutual funds charge fees and expenses, such as management fees and expense ratios. Investors should understand the charges associated with the mutual fund scheme before investing.
- Taxation: Mutual fund investments are subject to taxation. Investors should understand the tax implications before investing in a Micro SIP. Capital Gains from mutual funds are taxable in the hands of the investor. For equity mutual funds, capital gains from investments held for less than one year attract a short-term capital gains tax of 15%. On the other hand, for investments held for more than one-year long-term capital gains of more than INR 1,00,000 are taxed at 10%.
Frequently Asked Questions
The minimum investment amount for a Micro SIP is INR 100.
Mutual funds can offer Micro SIPs with a maximum investment amount of INR 50,000, as per the regulations set by the Securities and Exchange Board of India (SEBI).
No. A Pan card isn’t mandatory in micro SIP if the maximum investment amount is INR 50,000 or lesser in a financial year.
KYC is not mandatory for Micro SIP. However, the investor must produce a self-attested copy of their photo identification document and address proof.
Individuals, minors, NRIs (excluding PIOs), and sole proprietorships are eligible to open Micro SIPs. However, institutional investors such as HUFs are not eligible to invest through Micro SIPs.
Yes, investors can change the investment amount and frequency in a Micro SIP at any time.
No, there is no lock-in period for Micro SIP investments. Investors can redeem their investments at any time.
Yes, investors can choose to invest in multiple mutual fund schemes through a Micro SIP. Diversifying the portfolio is a recommended investment strategy to reduce the risk of investing in a single scheme.
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