One of the most popular pieces of advice on investing goes along the lines of “small and consistent investing has the potential to create wealth over the long term”. Systematic Investment Plans (SIPs) were started to help people get started in investing in mutual funds without needing a big lumpsum amount––they just invest a pre-determined instalment regularly into the mutual fund.
Most fund houses allow investors to start an SIP with as little as Rs. 500 or Rs. 1,000. This varies with different schemes. However, now there is a little sibling to SIP called Choti SIP to help young investors like students, freelancers, homemakers, and early professionals to get their foot in the door of investing in mutual funds.
Let’s learn more about the 250 SIP in mutual funds, Choti SIP features, and why it may be suitable for your investment needs.
What is a Choti SIP?
A Choti Systematic Investment Plan ( SIP ), popularly referred to as Choti SIP or 250 SIP, is a mutual fund investment plan where you can start investing in mutual funds with a small and affordable sum of Rs. 250 per month. While most SIPs allow investors to start making mutual fund investments with Rs. 500 or Rs. 1,000 per month, with Choti SIP the idea is to bring the monthly investment amount to lower than the price of a cup of café coffee. This encourages more youngsters to look at mutual funds for investing.
Moreover, it is win-win for both the investors and the fund houses since investors get to tap into the potential of compounding by investing early and fund houses will have a fresh pool of investors for their mutual fund investments.
5 Choti SIP Features You Must Know
Here are five important Choti SIP features you must know about:
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Up to 3 Choti SIPs: As per the current SEBI framework, investors may be restricted to up to three Choti SIPs, one each in up to three asset management companies.
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Growth Option Only: Choti SIPs are designed for potential wealth creation in mind. Therefore, they are currently available only under the Growth Option of mutual funds. By starting early, the investors have time on their side which may help their small investments potentially grow over time with the power of potential compounding.
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Payment Mode: Investors may be restricted to payment via National Automated Clearing House (NACH)and Unified Payment Interface (UPI)auto pay mode only for Choti SIPs.
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Installment Amount: Investors can choose to increase their 250 SIP investment amount as their financial situation improves with time. This will help grow the investment in line with your increased income. The minimum investment amount for a Choti SIP is Rs. 250 but investors may increase the amount based on their financial needs and evolving life situation.
Why Choti SIP is Ideal for Young Investors?
Here's how a 250 SIP can benefit you:
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Pocket Friendly: With a small sum of Rs. 250, investors can start making Choti SIP investments early. It may reduce the fear of market volatility. Investors can get a feel of the world of mutual funds by starting a 250 SIP mutual fund. Just set up your account with the auto-debit monthly for a Choti SIP and see your investment potentially grow over time.
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Power of Compounding: Young investors often have two big advantages when investing in a 250 SIP mutual fund: time and compounding. Even small contributions can potentially grow significantly over time with the power of compounding. You can align your Choti SIP investment to match your financial goal whether it is education, travel or early retirement.
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Ease of Operation: Many youngsters refrain from investing because handling the payments seems like a hurdle to them. However, they can go for digital payment via NACH or UPI autopay. This means they do not need to remember to keep making manual payments at every interval.
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Building the Habit of Investing: Contrary to popular belief, investing is less about luck and more about persistent investment over a longer period of time to ride out market volatility. Investment plans like 250 SIPs help build a habit of investing, albeit small amounts, into mutual funds. This discipline can help turn youngsters into seasoned investors with age.
In conclusion, Choti SIPs break that myth that you need a lot of money to start investing in mutual funds. Starting your financial journey with a 250 SIP not only builds the habit of saving but also puts you ahead in the wealth-creation game. So, if you’re in your 20s and wondering how to start, the answer is simple: start a 250 SIP mutual fund. Remember, when it comes to investing, starting early may be better than starting big.
Disclaimer: Choti SIP option may vary with schemes and asset management companies. Please refer to the Scheme Information Document (SID) to check for Choti SIP option.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.