What is Choti SIP? Start Your Investment Journey with Just ₹250 SIP

Systematic Investment Plans (SIPs) make investing simple. They help you stay within your budget while building wealth through small, regular contributions. However, even SIPs may not be affordable for everyone. To make investing more inclusive, the Securities and Exchange Board of India (SEBI) has introduced a new option called Choti SIP. Let’s find out what it is and how it works.

What is a Choti SIP?

SEBI has proposed a Choti SIP with a minimum investment of just Rs 250 per month. The Rs 250 SIP is designed to make mutual fund investing more accessible and inclusive. This new endeavour can help more and more people get started with their investment journeys.  

Why start with just Rs 250?

The idea behind starting a SIP with Rs 250 is to make mutual fund investing more accessible. For people juggling multiple financial responsibilities, investing can often feel out of reach. A low monthly amount makes it easier to take that first step. With just Rs 250 a month, the idea of investing feels less intimidating and more achievable for a wider range of people. Moreover, it helps you build the habit of investing, making you more likely to stay consistent over time.

Breaking down the mechanics – Understanding the Choti SIP features

Below are some key features of the Choti SIP:

• Limited to three SIPs with discounted rates: Choti SIPs are capped at three per investor across a maximum of three Asset Management Companies (AMCs). While AMCs can continue to offer SIPs starting at Rs 250, the discounted rates from intermediaries are available only on the first three SIPs.   
• Growth option only: Choti SIPs are only available under the growth plan in mutual funds.  
• No withdrawal hassles: Choti SIPs are designed for long-term investment with a minimum of 60 monthly instalments. However, you can withdraw your money at any time.
• Permitted payment methods: You can use digital modes like the National Automated Clearing House (NACH) and Unified Payments Interface (UPI) for your SIPs.
• Statement of Account (SOA) or Demat mode: You can hold your investments either in Statement of Account (SOA) mode like a regular mutual fund folio or in a Demat mode.

Benefits of starting early with a Choti SIP

Here are some advantages of starting early with a Choti SIP:

• Easy on the budget: Choti SIPs are affordable, which makes them perfect for students and young professionals. With SIP amounts as low as Rs 250, it is easier to start investing early without putting pressure on your monthly budget.
• Better growth over the long term: Starting early gives your money more time to grow through the power of compounding. These small contributions can potentially help you build wealth gradually.
• Financial flexibility from a young age: Investing in a Choti SIP allows you to start building financial discipline and flexibility early on. You will have the freedom to use these funds in the future for important goals like higher education, buying a home, starting a business, and more.

Who should consider a Choti SIP?

A Choti SIP can be ideal for:

• Young investors: Recent graduates who want to start building wealth early with minimal investment can consider Choti SIPs.
• Early-career professionals: If you have just started earning and want to develop financial discipline without straining your monthly income, you can invest through a Choti SIP.
• College students: With parental support or part-time income, college students can begin their investment journey and get a head start in life.
• Part-time employees: If you work part-time, you can benefit from Choti SIPs due to their low investment value.
• Homemakers: People managing household budgets who want to independently invest small amounts toward future needs can consider Choti SIPs.
• Experienced investors: Seasoned investors can use Choti SIPs to test new mutual fund schemes or diversify their portfolios.

How to start a Choti SIP?

Here are the steps to start a Choti SIP:

• Compare multiple schemes: Explore different mutual fund options that suit your risk profile.
• Select a mutual fund that matches your goals: Pick a fund that aligns with your financial goals and investment horizon.
• Select an auto-pay method: Choti SIPs can only be funded via NACH or UPI. Set up your preferred method to make your investments.
• Start investing: Once everything is set, begin your Choti SIP.

Common myths around small SIPs

Here are some common myths about small SIPs:

• Small SIPs do not result in sizeable returns: While larger investments may seem more rewarding, consistency often matters more than the amount. A 250 SIP mutual fund investment started early and maintained consistently over time can grow potentially through the power of compounding.
• Small SIPs are only for young investors: Although younger investors may benefit from a longer investment horizon, small SIPs are suitable for everyone, including experienced investors.
• Small SIPs offer low returns: The returns on a SIP depend on factors like fund performance, market conditions, and investment duration, and not just the amount you invest. A well-diversified portfolio with a Rs 250 SIP can sometimes outperform a poorly managed Rs 2,500 SIP. There is no fixed rule.

Conclusion

The newly launched Choti SIP is a great way to start your investment journey. However, it is important to do your research and choose a scheme that aligns with your financial goals. Additionally, consider gradually increasing your SIP amount as your income grows to maximise your investment potential.

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