Chhoti SIP is a unique initiative by SEBI. It is introduced to boost financial inclusion. SEBI introduced Chhoti SIP to make mutual funds investment more accessible for lower- and middle-class people. Chhoti SIP means allowing monthly contributions of INR 250 in the mutual funds. This encourages retail investors to develop financial discipline, benefit from rupee cost averaging and participate in long-term wealth creation affordably.
Chhoti SIP helps to invest in mutual fund with lower amount. This means students, a young professional, a home maker or anyone planning for the future can invest in the mutual funds without stretching their monthly budget.
What is Chhoti SIP?
Choti SIP is a small measure which helps individuals to begin with investment in mutual funds with a monthly investment amount of ₹250. In order to understand the concept of SIP, one needs to know that SIP means systematic investment plans, where an investor invests certain amounts systematically in mutual funds.
Choti SIP eliminates the problem for such people who have little money saved and want to begin with investments without having a big sum of money. Such individuals include students, housewives, young executives, etc.
With this plan, the disciplined and goal-oriented approach towards investing small sums in mutual funds SIP regularly becomes easy for new investors without disturbing their monthly expenses.
Why Chhoti SIP?
Light on Wallet
Chhoti SIP comes with lower amount of INR 250. This lower amount per month can be arrange by any small person. This means it is light on wallet.
Lower chance of discontinuing SIP
Due to the small amount of INR 250 in Chhoti SIP, the possibility of discontinuation of SIP in such a case will be negligible. It makes it affordable.
Diversification
The chances for diversification increase in this case. Better chance of diversification across more asset classes AMCs.
Power of Compounding
One benefit of small SIP is that of compounding, whereby the money you earn starts earning money for you. It is wise to start with an amount as low as Rs. 250 a month at the earliest possible moment, since your total investment will then start compounding exponentially.
Rupee Cost Averaging
By putting in a constant amount every month, one is able to get more units in the case of low markets and fewer units in high markets, hence making it possible to lower the average cost of purchases. This strategy makes it easier for investors to mitigate the risks associated with timing investments.
Who can start Chhoti SIP?
First-time investor – You need to be completely new to the Mutual Fund sector (you shouldn’t have any Mutual Fund investment or folio with any fund house).
Investment Amount – Precisely Rs. 250 every month – no less, no more.
Payment Method – The mode of payment has to be through NACH, e-NACH, or UPI Autopay. Cheque mode is generally not acceptable.
Investment Period – You have to commit yourself for at least 60 months (five years), but you can stop at any time.
Scheme Selection – Investment is allowed in the Growth scheme option only; IDCW or dividend option is not permitted.
Existing Folios – In case you already have SIPs or lump sum investment or folio with any MF, you would be ineligible for a Chhoti SIP and would have to go for a regular SIP.
How to Invest in Mutual Funds via Chhoti SIP?
Investing in your chosen scheme via Choti SIP at your initial stage is a straightforward process. Here’s how to initiate the same:
Choose an Eligible Scheme
Explore the options in terms of schemes offering Choti SIP, and pick out one according to your requirements and risk profile.
Reaffirm Your First Time Investor Status
Choti SIP is available exclusively to first time mutual fund investors in all the fund houses.
Get Your KYC Done
In case you haven’t done your KYC yet, you need to get it done either via the intermediary channel or directly on the Kotak Mutual Fund online platform.
Create Your SIP Mandate
Open your SIP mandate through NACH/UPI Autopay mode, which are the two allowed methods to invest via Choti SIP.
Make a Long Term Commitment
The minimum tenure is 60 months or five years, which also reflects discipline in investing and the concept of compounding.
Keep Investing and Do Periodic Reviews
After opening your plan, continue with it and do periodic reviews to monitor your investments.
Conclusion
Now you don’t need to worry about spending thousands of rupees every month for investing in the mutual funds. You can invest with low amount of INR 250 via Choti SIP. This means wealth generation is possible by making consistent lower amount investment in the mutual funds. If you are new in the stock market or want to start with small amount can surely start your investment via Choti SIP method.
