Mutual funds are gaining widespread popularity in India. With all the various fund categories, every investor can choose a scheme according to their objectives and risk appetite. Another significant reason why mutual funds are steadily becoming the go-to investment option, especially for new investors, is the low entry barrier.

Compared to investments like commodities or real estate, the minimum investment in mutual funds is highly affordable. But what is this minimum amount? Moreover, should you begin with the minimum investment amount, or is there an ideal amount for every investor? Let’s take a look-

What is the Minimum Investment Required in a Mutual Fund?

The minimum investment required in mutual funds varies slightly based on how you invest. There are two modes to invest in mutual funds- Lump Sum and Systematic Investment Plan (SIP).

Click Here to know the difference between Lump sum and SIP

• Lump Sum Investment

  Lump sum mutual fund investment is a one-time investment where you invest a lump sum amount in the scheme of your choice. Depending on the Asset Management Company (AMC) and the scheme category you choose, you can start investing with a minimum amount of Rs. 1,000 to Rs. 5,000 with the lump sum option.

• (Systematic Investment Plan) SIP

  With SIP, you can invest a smaller amount in your preferred mutual fund scheme at regular intervals. For instance, you can invest a fixed amount on a monthly, quarterly, half-yearly, or yearly basis. The minimum amount to invest in mutual funds through SIP can be as little as Rs. 500 per month, based on your choice of AMC and fund category.
  
  Click Here to know what is sip?

Is There an Ideal Amount We Can Invest in Mutual Funds?

While the minimum amount for mutual fund investment can range from Rs. 500 to Rs. 1,000, is it the ideal amount to begin your investment journey? Here are some factors that should help you make the decision-

• Investment Objective

  Every investment should have a fixed investment objective or goal. For instance, you might invest in mutual funds to build a retirement corpus, purchase a home or car, or for your child’s future.
  
  So, while mutual funds allow you to start investing with only Rs. 100 to Rs. 500 per month, you should consider whether the amount is adequate compared to your objectives.

• Current Finances

  Your current finances also impact the amount you should invest in mutual funds. For instance, if you’ve just started working, you might be unable to invest a lump sum amount.
  
  But as investing even a small amount is better than not investing at all, you should take advantage of the low entry barrier in mutual funds and start investing through SIP. You can increase your investment amount as you progress in your career and earnings.
  
  Click Here to Calculate SIP

• Investment Tenure

  Most mutual fund schemes, except the tax-saving Equity-Linked Savings Scheme (ELSS) and close-ended funds, offer the flexibility to redeem your investment as required. But with some mutual fund categories, like equity schemes, the ideal investment tenure is 5 years or more.
  
  So, after investing, the invested amount won’t be available for other financial needs if you want the investment to deliver potentially higher returns. Keep this point in mind when selecting the ideal mutual fund investment amount for you.

• Risk Appetite

  All mutual funds can be classified into 6-levels of risk. These are

  • Low risk

  • Low to Moderate Risk

  • Moderate Risk

  • Moderately High Risk

  • High Risk

  • Very High Risk

The risk level of every mutual fund is clearly mentioned in the Scheme Information Document (SID). This is to help investors select the right fund based on their risk appetite.

Besides this, also identify the amount of risk you can take. For instance, Investor A might be willing to invest Rs 10-lakh in a high-risk mutual fund, but Investor B might only be willing to invest Rs 5 lakh in the same fund.

Therefore, analyze your risk appetite and only choose an amount you can invest without taking unnecessary risks beyond your comfort level.

Invest the Right Amount in Mutual Funds to Achieve Your Financial Objectives

The mutual fund investment minimum amount is only Rs. 500 to Rs. 1000, making it an excellent choice for every investor. So, even if you’ve recently started working or are a student or homemaker, you can easily begin your investment journey with mutual funds. Moreover, leading AMCs now offer online mutual fund investment options for enhanced convenience.

However, while the minimum amount is low, investors should focus on the above points to select an amount that matches their investment profile and supports their financial objectives.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.