New investors often feel that you need a large sum of money to start investing in mutual funds. However, this isn’t true. Even with a small amount, one may invest in their scheme of choice, through a disciplined mode known as SIP.
What is a Systematic Investment Plan (SIP)?
A SIP is an investment mode through which one may invest a pre-determined amount of money at regular intervals in a mutual fund. Each SIP instalment is used to buy mutual fund units at the prevailing Net Asset Value (NAV). Investors are free to change the installment amount and frequency of their SIP plan, subject to the minimum investment amount of the respective scheme. The investment aims to grow with each instalment and shows the real power of compounding over a longer investment horizon.
What is the Minimum Mutual Fund Investment Amount Required for SIP Investments?
This amount depends on the scheme that you choose. It may range anywhere from Rs. 100/500 to Rs. 5,000. If you are a beginner with a low investing budget, you may invest via SIP with Rs. 100 per month if your scheme has set Rs. 100 as the minimum investment amount. Check the scheme information document for details.
You are free to increase your SIP instalment based on your needs. You can use a SIP calculator to find the minimum SIP amount you need to invest to meet your financial goals. In most cases, SIP plans with higher investment amounts may be targeted towards high-net-worth individuals and seasoned investors.
What are the Benefits of Starting Small with SIPs?
Here are the advantages of starting small with SIPs:
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Low Barrier to Entry: A small investment amount of Rs. 500 or Rs. 1000 to start a SIP plan allows you to start investing in mutual funds without straining your budget.
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Power of Compounding: Even the most modest investments may grow over a long period of time with the power of compounding. With large mutual fund investments, investors may be bound to make emotional investment decisions and exit the market at the wrong time. However, with small investments, your mind is more at ease and you may be willing to ride the market fluctuations.
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Flexibility: Since investors have the flexibility to increase or decrease the instalment amount and pause or stop the investment at any time based on their circumstances, they are more likely to stick to the mutual fund investments and potentially grow wealth over time.
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Habit of Investing: Nothing is more important in wealth creation than the habit and discipline of regularly investing money into reliable investment instruments. SIPs help investors do just that and that too with a lower entry barrier.
How to Choose the Right SIP Investment Amount?
Here are 3 key things to consider when determining the SIP amount suitable for you:
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Your Budget: Ensure that the SIP amount does not put a strain on your monthly home budget.
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Chosen Mutual Fund: Different mutual fund schemes may have a different minimum initial investment amount and instalment. Choose the one that suits your needs and income level.
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Your Financial Goals: Align your SIP amount with the financial objective and corpus you have in mind for the investment.
In conclusion, starting an SIP requires a minimal financial commitment with options available for as low as Rs. 500 per month. This makes SIPs an excellent tool for investors to take their first steps into the world of mutual fund investing. Over time, even small contributions can grow into substantial wealth, demonstrating the power of disciplined investing and the principle of compounding.
FAQs:
Q: What is the minimum amount required to start an SIP?
A: Currently, you can start a SIP in most schemes with Rs. 500. However, the actual amount varies with different schemes, so check the Scheme Information Document for details.
Q: Can I start an SIP with Rs. 100?
A: Yes, you can, provided the scheme opted allows Rs.100 as the minimum investment amount. Check the Scheme Information Document for details. However, to see any visible growth in your investment, you may consider investing a higher amount or stepping up your SIP once your investing budget increases.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.