An economy remains healthy when more and more people have confidence in it and are willing to invest their money in the market. Hence, it is not always enough that only high-income groups and regular investors take part in the investment.
The government wants everyone from daily wage workers to the middle-class people to invest in the market. A majority of the population believes that for efficient investment, a substantial initial investment is required. But, mutual funds have such a low minimum amount that everyone can invest.
A mutual fund is a pooled investment fund from different investors that is collectively invested in the stock market or other fixed income instruments like debt funds. So even if someone invests Rs. 500, that amount may be insignificant as a lump sum investment, but when pooled with similar amounts from thousands of other investors, it grows into a pretty significant corpus, which can then be invested for excellent returns.
One can invest a lump sum amount in a mutual fund of their choice and earn returns on it. They can add on to this amount as per their convenience.
A SIP or a Systematic Investment Plan is a much more convenient way for the common to invest in mutual funds. Instead of a lump sum amount, investors can regularly invest a fixed amount every month at a specified date. Investors can make the best of the low minimum amount advantage in this type of investment plan since even a small monthly investment amount can grow significantly in the long run.
A SIP works just like a bank loan in reverse. If someone doesn’t want to purchase a high-value commodity by paying the full amount in one go, a loan allows them to pay smaller EMI amounts every month. Similarly, a SIP gives the advantage of investing small amounts every month for those of us who do not want to spend a lump sum amount at the outset.
Believe it or not, today, a mutual fund minimum investment amount can be as little as Rs. 100 every month. This opens a massive opportunity for low-income groups and daily wage workers to start investing and fulfil their long term goals. Where once investment was just for people who had excess funds, things have changed for the better and anyone and everyone can now invest and contribute to a thriving economy.
Thus, the mutual fund industry has done well to tap into the rural sector by introducing these micro-SIPs that have a minimum SIP amount of Rs.100. Previously, people living in rural areas had to rely on non-regulated local entities to help them create savings by paying monthly instalments. The risks with this system were many since there was almost no transparency. The same small investors can now invest their hard-earned money in regulated markets. Of course, every fund is different and may have variable lower limits of investment. A simple inquiry at a local bank or a non-banking financial company can help you find out which are the best mutual funds with the lowest entry-level amount.