What is the Minimum Investment in Mutual Funds?

Of late, mutual funds have become one of the most popular investment avenues among different types of investors. With an option to invest in equity, debt, and hybrid funds, it can cater to a wide array of investors, having different risk appetite and investment horizon. Moreover, with mutual funds, investors enjoy a huge range of flexibility when it comes to the amount they want to invest.

Most of the people in India are not aware about the minimum amount of money that can be invested in mutual funds. They often think that they need big figures to start with and refrain themselves from investing. However, this is not true.Though it depends upon the Asset Management Company (AMC) and the mutual fund scheme in which an investor wants to invest, the minimum investment value in most of them ranges between Rs. 500 to Rs. 5000. However, in a bid to attract investors who looking to invest lower amounts, some domestic mutual funds even allow a minimum investment of Rs. 100.

There are two ways to invest in mutual funds – Systematic Investment Plan (SIP) and Lump Sum. While SIP refers to periodic investments of a fixed amount on a pre-determined date of every month, lump sum refers to one-time investments made by the investor.Though both these methods of investing have their own pros and cons, opting for the SIP route allows an investor to invest in mutual funds with the lowest possible amount and that too, at definite intervals of time. While most mutual funds demand a minimum lump sum investment of Rs. 1000 to Rs. 10,000, investors can invest as low as Rs. 100 per month by starting an SIP in these funds.

A lot of factors go into consideration in order to decide the ideal amount that an investor should be investing in mutual funds. Ideally, an investor should carefully evaluate his/her investment objective, monthly income, expenses, and investment horizon for determining the amount that he/she should invest in mutual funds.For example, if an investor is looking to create a retirement corpus of Rs. 25 lakhs by investing in mutual funds for around 20 years, he/she should start an SIP of Rs. 2,500 per month. Considering that the fund is able to deliver average annualised returns of 12%, the investor will be able to create a cumulative corpus of Rs. 24.73 lakhs after 20 years. The Final Word Historically, it’s seen that the mutual funds provide best results to the investors who can stay invested in them for a long period of time. Therefore, an ideal SIP amount should be such that it allows the investor to continue investing for a prolonged duration without facing any shortage of liquid cash.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.