Impact of Micro SIP

Impact of Micro SIP

As the legend goes, once an inventor presented a chessboard to the king. In return, he asked for a reward. He requested the king to place a single grain of rice in the first box, two grains of rice in the next box, four grains in the subsequent box, and so on. The amount that the king will reach on the 64th box would be given to the inventor. The king did not understand and thought that the amount would be quite less. But his treasurer told him that in the 32nd box itself all the rice grains of the kingdom would be finished.

If we look back at our traditions, culture or different myths, we will realize that even very small contributions will lead to a big difference. A dripping tap fills a bucket in no time. The thirsty crow threw so many pebbles, one by one, to drink the water.

Now we are coming to investments. Suppose you start with an amount of Rs 500 per month for SIP, then in a year you will have contributed to around Rs 6000. In ten years, this amount will increase and become Rs 60000. Assuming a return of 12%, you will get Rs 1.16 lakh. IN 20 Years, the accumulated amount will be Rs 5 lakh. Shall we tell the amount that gathers in 50 years? Rs 1.98 crores!

Many SIPs ranges from Rs 100 to Rs 500. We call them micro SIPs. You may think how a micro SIP can become beneficial? Who can utilize micro SIPs? Anyone, who does not possess a surplus to invest, can invest in micro SIPs. Those who do not have a higher income can also invest in micro SIPs. After all, saving Rs 100 to Rs 500 is not a great deal.  Micro SIPs are very beneficial in accumulating a corpus but without putting any strain in one’s financial situations. In the long term, micro SIPs can prove to be of great help.

There are many other advantages of micro SIPs. First of all, they will promote a healthy habit of investing. The second advantage is that all the low-income earners can use micro SIPs as a launching pad to build a bright financial future. Micro SIPs act as a bridge between where they are at present and where they want to be in the future. With time, they witness an increase in their income. So they can increase the amount of SIP investment too. They can also utilize any windfall to increase the amount of SIP investment.

Also, another advantage of micro SIPs is that they will train you in the art of investing. You will acquire knowledge about choosing a mutual fund, getting your KYC done, tracking the performance of your fund and a lot more. Hence, by investing in micro SIPs, you will acquire knowledge about mutual funds at a very low cost. Those who are cautious enough and want to test the waters before investing can find micro SIPs to be of great help.

Last but not least, micro SIPs will involve you in the vicious circle of saving and investing. As their corpus grows, investors tend to save more and invest more. Also, you will be able to invest in most equity schemes with the help of micro SIPs.