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Micro SIP: option for cautious investor

As investors step back from equity markets, the impact is being felt across the board. Several market players, includes mutual funds, are finding that investors are not showing the same kind of enthusiasm for their offerings as before.

business Updated: Nov 25, 2008 21:16 IST

As investors step back from equity markets, the impact is being felt across the board. Several market players, includes mutual funds, are finding that investors are not showing the same kind of enthusiasm for their offerings as before. In some areas, investors have even stopped systematic investment plans or are hesitant of resuming new plans immediately after the previous instructions are over. In such a situation, mutual funds are looking at Micro SIP.

Micro SIP
This is nothing but an extended version of the systematic investment plan (SIP). The difference here is that the amount involved is extremely small and is often in hundreds of rupees.

As compared to this the normal SIP amount usually starts from thousands and can go up to quite a high figure. The nature of this investment is targeted at those who cannot afford large investments, but have no problem in going towards smaller figures because they can afford this amount out of their income.

Nature of investors
People who go in for Micro SIP are often very small investors and many of them are entering the investment field for the first time.

Normal investors in SIP are usually a mixture of new and existing investors who want to build their wealth after their initial experience. This also results in a position where the number of investors in the area has to be large in order to see some amount of fund being collected; otherwise the overall figures might not look big enough.

Stability factor
In many cases investors who opt for the Micro SIP continue with the process because this does not disrupt their other activities. The chance of these investors completing the entire process is higher than other cases and because of this there is an element of stability.

Investors are also happy to undertake this process and are able to witness a slow build up of wealth. This process also extends the mutual funds to new areas and thus leads to a larger coverage for funds. All these make Micro SIP an area that can be used when investors are starting out in their planning process and are looking to build their wealth in a slow and steady manner.