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There are numerous financial instruments out there, vying for our attention – marketing their schemes, attractive rates of interest, repayment plans, investment returns and what not. Traditionally people looking for a loan or planning to make an investment would look no further than the nearest branch of a nationalized bank! The more adventurous kind would try their luck with equity markets, be it mutual funds or shares.

A very popular method of investing in Mutual Funds is through the SIP route. Investors opting for SIP (Systematic Investment Plan) make their MF purchases through monthly installments. There are advantages of making small purchases every month as against a bulk MF purchase at one time. The fluctuations in the equity market over the year will get evened out in case of making monthly purchases. So, the seasonal fluctuations will not greatly affect our investment value.

However, we at Shanthala Chits would advocate the choice of Chit Funds as a better investment option when compared to Mutual SIPs. There are a multitude of reasons for our recommendation.

The risk factor

With the markets booming like how it is now, shares and mutual funds appear to be a very attractive option. In fact, a large number of deposit holders are seen to be shifting to equity investment in search of high returns. When stocks/fund houses are carefully chosen, investors are known to make above-average profits. Good performing stocks also earn handsome dividends.

The flip side of the equity markets is its volatility. You cannot take it for granted that you will keep making money year on year. Stock indices have cyclic fluctuating patterns, companies are affected by business prospects and government regulations. So only a knowledgeable investor should rely on this instrument. In addition to the market vagaries, another aspect to consider now is the long term capital gains and dividend being taxed at the investor end. This is apart from the commissions that mutual fund houses charge for their services. So the final returns are not as handsome as they appear on paper. A market-savvy investor can hope to make 8-15% returns going by the industry average. For the uninformed investor, it’s a huge risk.

In contrast, there is no risk of losing your capital in Chit Funds. Whatever you invest, you can get back in its entirety plus a reasonable rate of return of around 7-9% over a tenure of 2-3 years. With the newly enacted Chit Fund Amendment Act by the Government of India, a major positive image make-over is happening in the chit fund industry. The fraudulent Ponzi operators are getting weeded out. The established reliable ones are getting much-deserved credibility and government recognition. This will go a long way in reassuring customers. It is predicted that chit funds are likely to hold about 15-20% of the savings in India in the next 10 years. Investors need to ensure they are choosing a Government registered Chit Fund, then they can rest assured of the safety of their investment.

The borrowing aspect

One other major drawback with Mutual Funds SIP is the borrowing aspect. In the initial months of starting a SIP scheme, there isn’t much capital accumulated because the investment value is only as much as the number of MF units you’ve purchased in those few months. But if there is an urgent need to borrow money, you don’t have any funds to fall back upon. And you might have to resort to taking a loan at high rates of interest.

However, chit Funds are a dual purpose financial instrument. You make your investment in a chit scheme over a tenure of 2-3 years. But in case you need money urgently in the second or third month itself, you are free to withdraw the entire chit prize money at no extra cost! So, there is no need to fall back upon any debt instrument to fund your emergency financial needs. You can withdraw your investment within a few days, in a hassle-free way with no delays or difficulties. Both businesses and households can greatly benefit from choosing chit funds as a regulated, fixed income, secure investment option.


Shanthala Chits has been in the business for over 2 decades now. We have always been a strong advocate of investor rights and interests. The small investor and borrower – whether a householder or a businessman – is at the center of our focus. We have always believed in keeping our investors informed and our customer service is also tuned to take care of our investor’s welfare and needs.

We are a Government approved chit fund company with a 25-year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, the Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our customer satisfaction and secure investments. Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.

Anuradha C
Anuradha C

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