What is the minimum investment for a mutual fund

Do you remember that famous dialogue “Mutual Funds sahi he!”? Also, do you remember that super-fast dialogue on TV ads at the end of every mutual fund “Mutual Fund investments are subject to market risks, read all scheme related documents carefully”. The ad attracts us to invest in mutual funds and gives a few seconds to hear about the risk involved. India is slowly growing towards financial literacy and thus, we should understand the risks as well as returns associated with each investment.

What is a mutual fund? It is nothing but a pool of money collected from various individual investors who want to invest in markets but lack either the handsome chunk of money (thousands and lakhs of rupees) or knowledge of picking stocks. Well, let us acknowledge the fact that not every individual in India has time to study the markets and invest at correct time frames. This is where mutual funds come into play.

With the growing per capita income of individuals in India, the problem today is not with “earning the daily wages” but the problem in “investing” the hard-earned money in appropriate vehicles.


You cannot just blindly go ahead with investment with any mutual fund available on paisabazaar, ET Money or your demat account. There are a few things to be taken care of before investing:

1.   Define your financial goal: What is your financial goal? What do you want to save for? Define your purpose first. Your goal can be financial independence, savings for marriage, for education, for a new house or any other purpose.

2.   Amount required for the goal: Quantify the figure you want your bank account to be credited with on a certain date. This has to be crystal clear.

3.   Time Frame: Many people know the amount they want to receive, but they are usually unclear with the time frame within which the amount would be required. There has to be some number of years or months on paper for which you would like the amount to be received.

4.   Risk Profile: This is the most important step. Understand the type of person you are, when it comes to investing the money. Risk and return go hand in hand. Higher the risk, higher the return and higher quantum of return will help to achieve the goal faster. That does not mean you should go for the highest risk ever. Read the word “risk” as “chances of losing your money”. Risk is also associated with liquidity. Liquidity means the quickness of the fund manager to credit your bank account whenever you want to redeem (i.e., sale) all your units.

5.   Choosing the appropriate fund: Once the risk appetite is clear, you can choose the right fund for you. “One size fits all” does not apply in mutual funds.


Now the question arises, “What is the minimum amount to invest?” You would be happy to know that you can invest as low as Rs. 100 per month. Thus, you can skip any of the following and invest Rs. 100 per month

 McAlootikki burger of McDonald’s

 Golden Corn pizza of Dominos

 Corn & Cheese pizza of Pizza Hut

Please focus on the fact that I said “any” of the above. Now the basic question arises, how come such a low amount is allowed?

We have Maggi Tomato Ketchup priced at Rs. 160 approximately, but we also have Rs. 10 sachets at a local grocery shop. If the taste is so good, then why offer it at a lower price? Ever wondered why daily essentials such as shampoo, bread, jam, Parle biscuits, Maggi noodles, Magic Masala are available at around Rs. 10 per unit?

This is done to induce the customers to try it once and acquire the taste for it. The same logic is used by mutual funds.

The approach also serves to increase the reach of financial markets to individuals who earn less than Rs. 10,000 per month. Thus, a small amount inculcates the habit of investment at an early stage. The point of mutual funds is to let people know that there are better and more feasible options for investment as compared to fixed deposits.


There are two options for investment in mutual funds and which can be used interchangeably.

1.Systematic Investment Plan (SIP):

This is called disciplined investment. This method automatically debits a fixed investment amount from your bank account (obviously with your authorisation) at a specific date on a monthly basis / weekly basis / daily basis as per your choice of frequency. This helps you build a big corpus through small investments.

2.Lumpsum investment:

Let’s say you have your bonus received in this month or a huge amount of unexpected money has been cleared. You can invest this entire money in one shot.


Your SIP decides the amount of corpus you build. As per the paisabazaar SIP calculator, we can arrive at the following conclusion with SIP of Rs. 100 per month:


Note: Above calculations are based on a medium risk profile (18% is medium level of risk).


Mutual funds are best for those investors who do not have time to invest in a market study and prefer an expert who can manage their money. Also, it helps to diversify your investment in various streams as selected by the mutual fund. This further diversifies the risk, while helping you build your money. Disciplined investing helps you during financial emergencies. Thus, even if you have complete knowledge about the stock markets, you should consider investing in mutual funds.

If not now, then when?

FlipItNews is the best app for finance, business, cryptocurrency (bitcoin) and share market news live in India. With FlipItNews you get the latest finance news, stock market news and business news in India delivered directly to your phone in 50 words or less.

Post a Comment