Micro SIP

Micro SIP is a variant of the traditional SIP, enabling investors to invest smaller amounts, often starting as low as Rs. 100, at regular intervals.
Micro SIP
3 min
25-June-2024

A micro SIP is a form of mutual fund investment that enables investors to begin with a minimal monthly contribution of either Rs 100 or Rs 50. The aim of micro SIPs is to appeal to small investors, including daily wage earners, students, and children, who may have limited funds to invest. Through consistent contributions over time, investors can take advantage of rupee cost averaging, which reduces the average cost per unit of investment.

Micro Systematic Investment Plans (SIPs) have made it easier for investors to access and invest in mutual funds. Asset Management Companies (AMCs) have introduced micro SIPs in mutual funds to attract an increasing number of investors. By allowing individuals to invest much smaller amounts in mutual funds at regular intervals, these micro SIPs are becoming increasingly popular.

Let us see what micro SIPs mean, why they are beneficial and what SEBI’s regulations regarding this strategy are.

What is meaning of Micro SIPs?

A micro SIP is a type of Systematic Investment Plan that puts a spin on the traditional SIP strategy. In traditional SIPs, the minimum amount that can be invested in mutual funds is Rs. 500. However, micro SIPs make mutual fund investments more affordable by taking the minimum investment amount lower, to Rs. 100. Since the minimum investment allowed is lower, micro SIPs in mutual funds are more affordable

Features of mutual fund micro SIPs

The key features of micro SIP investments include the following characteristics:

  • Low SIP amount: The defining feature of micro SIPs is the low investment amount, starting at just Rs. 100. This is suitable for most investors who have a smaller investment budget.
  • Flexible investments: Micro SIPs in mutual funds are flexible and can be adjusted to suit the financial capacity and requirements of the investor. This brings an element of adaptability to the investment process.
  • Simplified KYC: The KYC process is not mandatory for micro SIPs that do not exceed Rs. 50,000 in one financial year. This makes it easy for individuals to start investing in mutual funds. Also read, How to do mutual funds KYC in India.

SEBI regulations for micro SIPs

The Securities and Exchange Board of India (SEBI) is responsible for regulating mutual funds in India. To make small-ticket investments in mutual funds easier for investors, SEBI has ensured that KYC is not mandatory for micro SIP investments within the threshold of Rs. 50,000 per financial year.

Benefits of investing in mutual funds via micro SIPs

Choosing the micro SIP route to invest in mutual funds can give you many advantages. They include the following:

  • Easier diversification: With micro SIPs, you can invest small sums in a mix of different mutual funds without exceeding your investment budget. This makes it possible to diversify your portfolio easily.
  • Affordability: Micro SIPs in mutual funds are also more affordable for investors because of the low regular investment amount. This means investors do not need to wait to save up a sizable amount before starting their investments.
  • Disciplined investments: SIPs also encourage disciplined investments in different assets. This, in turn, leads to various benefits like the power of compounding and the advantage of rupee cost averaging.

Is a micro SIP suitable for you?

A micro SIP in mutual funds may be the ideal choice for you if:

  • You are new to investing and want to start small
  • You have a limited budget for investment
  • You prefer flexible investment options
  • You want to cultivate the habit of saving regularly
  • You want to gradually diversify your investment portfolio
  • You prefer a simple and straightforward investment process
  • You want to benefit from the long-term effects of compounding

Things to know before starting a micro SIP

If you want to leverage the advantages of a small-ticket SIP, you can choose a suitable mutual fund and start investing.

However, before you do, you need to be aware of the different aspects such as:

  • The risks involved
  • The expected returns
  • The expense ratio
  • The frequency of investment
  • The tax implications
  • The procedure to start investing
  • The minimum and maximum SIP limits

Knowing these factors can help you make an informed decision about your micro SIP investment. Additionally, you can also choose your preferred funds and set up your SIP in such a way that it aligns with your overall financial goals and risk tolerance.

Conclusion

Whether you want to start a regular SIP or a micro SIP in mutual funds, you need to ensure that the mutual fund scheme you choose is suitable for your goals and your risk tolerance. You can do this by choosing to compare mutual funds and narrow down your options before you start SIP investments in suitable schemes.

This becomes much easier on the Bajaj Finserv Mutual Funds Platform, where you can find over 1,000 mutual funds to choose from. No matter which fund you choose, you can start a micro SIP with an amount starting at Rs. 100 and achieve your milestones as planned.

Essential tools for mutual fund investors

Mutual Fund Calculator SIP Calculator Lumpsum Calculator Step Up SIP Calculator
SBI SIP Calculator HDFC SIP Calculator Nippon India SIP Calculator ABSL SIP Calculator
Tata SIP Calculator BOI SIP Calculator Motilal Oswal Mutual Fund SIP Calculator Kotak Bank SIP Calculator

Frequently asked questions

What is the meaning of a micro SIP in mutual funds?
Micro SIP in mutual funds allows investors to purchase mutual fund units with relatively small amounts, often as low as Rs. 100.
Can I invest Rs. 100 in mutual funds daily via a SIP?
Yes, you can use a micro SIP investment strategy to invest Rs. 100 per day in mutual funds.
What is the lowest SIP amount allowed?
With a micro SIP in mutual funds, you can invest amounts starting at Rs. 100 in the mutual funds of your choice.
How can I activate my micro SIP in mutual funds?
You can activate your micro SIP investment strategy using your trading account or by logging into the trading platform offered by your preferred stock broker or mutual fund house.
For micro SIP investments, what is the maximum limit?
The maximum limit for micro SIPs is Rs. 50,000 according to the regulations of the Securities and Exchange Board of India (SEBI).
Is PAN mandatory to start a micro SIP in mutual funds?
No, if your micro SIP investments do not exceed Rs. 50,000 in a financial year, a PAN is not mandatory.
What documents are required to start a micro SIP?
Although KYC verification is not mandatory for micro SIP investments, you may have to provide a self-attested copy of your address proof and photo ID.
What are the eligibility criteria for investing in mutual funds via micro SIPs?
Individual investors including minors and NRIs can invest in mutual funds via micro SIPs. Sole proprietorships can also do so. Institutional investors, however, cannot choose this investment avenue.
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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.