Chit Fund Loans

Chits (vs) Mutual Funds

Systematic Investment Plans or SIP's as they are popularly known are marketed aggressively to the younger generation, high net worth individuals and the like. A SIP is a financial scheme where investments are made daily, monthly or quarterly. These investments are invested by the fund company in the stock markets. Every fund has a Net Asset Value (NAV). The fund issues shares. The number of units allotted to the investor would depend on the amount he invests and the NAV of the fund at that particular point in time. So the number of units issued would vary depending on the NAV. It is important to note that the NAV is entirely dependent on the market conditions prevailing at that time. There are chances where the current value of investment is less than the actual cost of investment. There are entry and exit loads i.e. charges which have to be paid by the investor to join or exit the fund. To sum up investing in a mutual fund carries moderate to high risk depending on the market.Investing in a chit is similar to a SIP, where the investor would invest money monthly into a chit fund group he chooses. The monthly installment would vary depending on the competition in the group. There is no entry or exit fee charged and the risk involved in investing here would be very low in comparison to a mutual fund.