LIC MF to Reduce Minimum SIP Level to ₹100 a Day: A Gateway to Easy and Affordable Investments

In a move aimed at making investing more accessible to the masses, LIC Mutual Fund (LIC MF) has announced a reduction in the minimum Systematic Investment Plan (SIP) amount to just ₹100 per day. This decision marks a significant shift in the financial landscape, particularly for those who have previously viewed mutual fund investments as out of reach due to financial constraints. By lowering the entry barrier to as little as ₹100, LIC MF is empowering small investors and promoting a culture of disciplined savings and investment.

This article explores the implications of this initiative, how it benefits individual investors, and what this could mean for India’s mutual fund industry as a whole.

1. Democratizing Investments: Why ₹100 a Day Matters

The reduction of the minimum SIP amount to ₹100 per day is a game-changer for several reasons. For many individuals, especially those from low- and middle-income households, the perception has been that mutual fund investments are meant for people with significant disposable income. With LIC MF’s move, the door to investing is now wide open for millions of small investors, including:

• Salaried employees with limited monthly savings.
• Housewives who manage household finances and are looking to grow small savings.
• Students and young professionals who are new to investing and prefer starting with smaller amounts.
• Individuals in rural areas or tier-2 and tier-3 cities who may not have large capital but can commit smaller amounts regularly.

By offering the option to invest ₹100 a day (₹3,000 per month), LIC MF is not only making mutual funds more affordable but also encouraging the practice of regular savings and investments. Even small, consistent investments can grow over time due to the power of compounding, helping individuals build wealth for long-term financial goals.

2. The Power of SIP: Building Wealth with Small Investments

A Systematic Investment Plan (SIP) allows investors to invest a fixed amount regularly—usually monthly—into a mutual fund scheme. By opting for SIPs, investors benefit from the following:

a. Rupee Cost Averaging

SIPs are known for leveraging the concept of rupee cost averaging. Since investments are made consistently over a period, investors purchase more units when prices are low and fewer units when prices are high. Over time, this helps in lowering the average cost per unit and reducing the impact of market volatility.

b. The Power of Compounding

Even small investments made regularly can grow significantly over time due to the magic of compounding. With SIPs, returns generated on investments are reinvested, allowing the corpus to grow at an accelerated rate. The longer the investment horizon, the more substantial the gains through compounding.

c. Disciplined Saving and Investing

SIPs promote a disciplined approach to investing. With a fixed amount deducted from the investor’s account every month, SIPs encourage regular contributions to long-term financial goals without the need for active monitoring. For investors who struggle with saving, this structured approach helps in developing good financial habits.

For instance, a daily SIP of ₹100, which adds up to ₹3,000 per month, can grow into a sizable amount over time. Assuming an annual return of 12%, an investor could potentially accumulate ₹10 lakhs in 15 years with just ₹100 a day, thanks to compounding and disciplined investing.

3. Impact on Retail Investors: Making Mutual Funds Accessible

LIC MF’s decision to lower the minimum SIP to ₹100 per day has far-reaching implications for retail investors. For many, this reduction means that investing in mutual funds is now an affordable option. The key benefits for retail investors include:

a. Affordability

With ₹100 being a minimal amount for most people, LIC MF has made it possible for a larger section of the population to participate in wealth creation. People who were hesitant to invest in mutual funds due to higher minimum SIP amounts can now comfortably start their investment journey without stretching their finances.

b. Financial Inclusion

This move also promotes financial inclusion by targeting smaller investors from rural areas, students, and young professionals. These groups often shy away from investing due to limited financial knowledge or disposable income. By offering SIPs at a lower amount, LIC MF is making mutual fund investments accessible to everyone, regardless of their financial background.

c. Opportunity for New Investors

For beginners, the fear of losing large sums of money in a volatile market often discourages them from investing. However, with ₹100 per day, investors can test the waters of mutual funds without committing large sums upfront. This helps build confidence among new investors while educating them about the benefits of long-term investing.

4. How Does It Compare with Other Investment Options?

Lowering the SIP amount to ₹100 per day also makes mutual funds more competitive compared to traditional savings instruments like fixed deposits (FDs), recurring deposits (RDs), and post office savings schemes. While these traditional options offer safety and fixed returns, mutual funds—especially equity mutual funds—have the potential to offer higher returns in the long run, albeit with some level of risk.

a. Higher Potential Returns

While FDs and RDs offer fixed returns (generally ranging from 5% to 7%), mutual funds have the potential to generate higher returns (historically around 10% to 12% for equity funds) over a long investment horizon. By starting with ₹100 a day, investors can harness the power of equity markets while spreading their risk over time.

b. Tax Benefits

Many mutual fund schemes, such as Equity Linked Savings Schemes (ELSS), offer tax benefits under Section 80C of the Indian Income Tax Act. By investing in these schemes, investors can not only grow their wealth but also save on taxes, further enhancing the attractiveness of mutual funds compared to other traditional savings instruments.

c. Liquidity

Mutual funds, particularly open-ended schemes, offer greater liquidity compared to FDs and post office savings schemes, which often have lock-in periods. Investors can redeem their mutual fund units at any time (though subject to market fluctuations), providing more flexibility in managing their investments.

5. Encouraging Long-Term Investment Culture

One of the key objectives behind LIC MF’s move is to encourage long-term investing among Indian investors. In a country where gold, real estate, and fixed deposits dominate investment portfolios, many investors tend to shy away from equity-linked instruments due to perceived risks. By making SIPs more affordable, LIC MF aims to promote mutual funds as a viable investment option for long-term wealth creation.

a. Building Wealth for Long-Term Goals

Whether it’s saving for a child’s education, planning for retirement, or purchasing a home, SIPs offer a structured approach to accumulating wealth over time. With just ₹100 a day, investors can steadily build a corpus that can help meet their financial goals in the future.

b. Hedge Against Inflation

One of the biggest challenges with traditional savings instruments is that their returns often fail to keep up with inflation. Mutual funds, especially equity funds, offer an opportunity to generate inflation-beating returns, ensuring that your purchasing power remains intact over time.

6. Conclusion: A Bold Step Towards Financial Empowerment

LIC MF’s decision to reduce the minimum SIP amount to ₹100 per day is a bold and inclusive step towards financial empowerment for millions of Indians. By making mutual funds more accessible to small investors, LIC MF is not only fostering a culture of disciplined investing but also helping individuals take their first steps towards long-term financial security.

Whether you’re a seasoned investor looking to diversify your portfolio or a beginner ready to start your investment journey, this initiative offers a unique opportunity to tap into the potential of mutual funds without a heavy financial commitment. With the power of compounding, rupee cost averaging, and the flexibility that SIPs provide, even small investments can grow into significant wealth over time.

In an era where financial literacy and inclusion are paramount, LIC MF’s move is a welcome step that brings more people into the fold of systematic, long-term investing—creating a brighter financial future for all.