Investment in mutual funds through SIPs has become more affordable for investors.
In the latest example, ICICI Prudential Mutual Fund has reduced the minimum application size in mutual funds through SIPs to Rs.100 from Rs.500. The fund house has reduced the minimum application size across all equity schemes.
A few months back, Reliance Mutual Fund had reduced its minimum application size to invest in mutual funds through SIPs in select schemes to Rs.100.
Experts believe that Rs.100 SIPs attract first time investors. Harsh Jain of Groww, an online platform said that many first time investors invest in mutual funds through SIP with just Rs.100. “4% of our investors invest in mutual funds through SIP with Rs.100. These investors want to taste mutual funds. Once they develop confidence in the product, we have seen them increasing their SIPs to even Rs.5000 and Rs.10,000 a month.”
Jain feels that the mutual fund industry should offer such SIPs to increase the penetration.
A few years back, many fund houses had tied up with third party institutions like NGOs, micro finance institutions and co-operative banks to promote micro SIPs.
Micro SIPs work on a financial inclusive model which aims to collect tiny sums from daily wage earners in semi urban and rural pockets of the country. Reliance, SBI, UTI, Aditya Birla Sun Life, ICICI Prudential and Axis Mutual Fund were among those which used to offer micro SIP options. However, micro SIPs did not take off due to higher acquisition cost and logistics issues.
However, the cost of acquisition and logistics have come down drastically with technology and emergence of online distributors. It will be interesting to see how the new age micro SIPs fare for the Rs.25 trillion mutual fund industry.
