"Initial Investment" for SIP

I am new to Coin, in fact new to entire Zerodha family. I am trying to setup a monthly SIP for one of the funds. When I click on Direct SIP button to initiate the investment, I am presented with an mandatory option of putting in an initial investment.

For my selected fund it is a minimum of Rs.5000/-. And the process won’t proceed any further if I select any amount lesser than 5K there.

I am not sure if this sort of mandate is applicable for SIP investments. I had not been asked for this initial investment by my current investment broker when I first started my SIP there in the same fund.

Can anyone suggest if I will have to pay this initial investment to initiate the SIP?

Fund: Mirae Asset India Opportunities Fund - Direct Plan - Growth

This is the minimum requirement for SIP for the fund
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There are 2 modes of investments accepted by the AMC :

  1. Lump sum
  2. SIP

Lump some investments consists of ’ Minimum Initial Investment Amount ’ and ’ Minimum Additional purchase Amount '.
Lets assume you are doing a lump some investment for the first time in a fund ( for example SBI Blue Chip Fund) then you are required to invest Rs 5000 or more as this is the minimum initial investment amount. If you wish to an additional investment (lump sum again) in the same fund later on any day then you are required to invest Rs 1000 or more as this is the minimum additional purchase amount. Both these values are specified by the AMC. Lump sum investments are basically done if you are more inclined towards buying mutual fund on a particular day for that NAV price.

SIP means Systematic Investment Plan is a disciplined form of investing your money on particular dates that are specified by the AMC. Also, the AMCs require a ECS/NACH mandate to debit the investor’s bank account. Generally, the SIPs are on monthly or quarterly basis. Now, taking the example of SBI Blue Chip Fund again, lets assume you want to invest in this fund for the first time through this SIP mode and not lumpsome. In this case, the AMC has specified the minimum investment amount via SIP is Rs 1000.

At Zerodha, we do not follow the conventional SIP model as we do not collect ECS/NACH mandate forms for debiting the bank account because if we need to follow this process then we need to collect the ECS forms and then send it to 30 different AMCs (as we have funds from 30 different AMCs). Also, the bank may levy charges if on any particular installment date, the amount is not available for being debited.

So, the SIP that we have created is essentially out of the 2 fields specified in the lump sum mode. So, if you wish to invest in SBI Bluechip Fund for the first time via SIP then once you click on SIP tab on our platform then you will see 2 fields ’ Minimum Initial Investment Amount ’ and ’ Installment Amount '. The installment amount is nothing but the minimum additional purchase amount. If you have already invested in the particular fund and if you click on the SIP tab then it will not ask you for the Minimum Initial Investment Amount but only for Installment Amount.
The advantage here is that you can do a weekly, 15-day SIP, pause the SIP, edit the SIP, select particular dates for the SIPs at your convenience which is not easily possible via the conventional SIP model. This is our customized version of the SIP. Also, the amount is debited from your trading account.

In any case, the minimum initial investment amount varies between different AMCs and schemes. So, some schemes might ask for Rs 5000, Rs 1000 or Rs 500

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So does it mean the initial amount which we pay will be added in our fund investment only ?

Yes.

If I start an SIP with an initial amount of 5000 in a MF for eg - SBI small cap, what will happen if I cancel the SIP before even doing the first SIP instalment. Do I loose any money in the process. The Initial amount is sent to the AMC will they refund it?

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Nope.

To make it more clear, and to add on to what @Bhuvanesh mentioned, as SBI Small Cap fund is an AMC SIP fund (i.e suspended from lumpsum investment) there is no initial investment in these funds, even if you create a SIP on lets say 2nd August and mention the SIP day as 1st of every month the first order will not be placed on 2nd August rather it will be executed on the due date i.e (1st September) so from 2nd August to 31st August there wont be any deductions and you cam cancel the SIP. You can also refer to this link to know more about these funds.

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