The best thing about mutual funds is that they enable you to invest with very small amounts. Many people ask what is the minimum amount to invest in mutual funds? There is no other way you can invest with reasonable diversification with an amount as low as ₹ 500. SIP (Systematic Investment Plans) of a lot of mutual funds allow min investment with just ₹ 500.

Now coming to the topic: Best SIP plans for beginners. Well, first a disclaimer – there is nothing like the best plan. Or it is impossible to find the future best plan because past performance does not guarantee any future returns. So the best way to find the “best” plan is to make a reasonable and intelligent guess based on past performance.

The most important criteria to consider before answering this question: What is your purpose? Based on the purpose we can figure out the mutual fund category that will suit this purpose. The minimum limits are typically different for lump sum and SIP plans. Let’s look at a couple of examples.

Best Mutual Funds for Beginners

Short Term Investment – Debt Fund

If your goal is to park your cash, you can either consider a liquid fund or an ultra short-term fund.

Liquids are the debt funds which can be easily converted in to cash that too within a day or two’s time.

And if you want to invest for a shorter duration, say for 3-6 months, then ultra short term fund are best debt funds for you to invest in.

There are bunch of funds that have minimum investment as ₹ 500 or ₹ 1000 . Here is list of some best ones in this category for beginners:

Funds Type
Axis Liquid Fund Liquid
Franklin India Low Duration Fund Ultra Short Term

Axis Liquid Fund – Liquid Fund – This is a liquid fund which means it is a very low risk fund. These funds are ideal for investing even for a few days. They give returns that are slightly higher than the rate given by savings accounts. This particular fund gave a return of around 6.7% in the last 1 year. Minimum SIP amount for this fund is ₹ 1000.

Franklin India Low Duration Fund – Ultra Short Term Fund – This is a short term debt fund. You can invest in this fund starting from a few months to a few years. In the last year, this fund gave returns of around 8%. Debt funds are very low risk funds. Minimum SIP amount for this fund is ₹ 500.

For 2-3 Years – Balanced Funds

Balanced funds are good for average investors looking to invest in equities. Balanced funds are investment instrument, where an asset management company invest the money gather into both debt and equity.

Funds Type
ICICI Prudential Balanced Advantage Fund  Hybrid Equity (Balanced)
Tata Retirement Savings Fund – Moderate Plan Hybrid Equity (Balanced)

ICICI Balanced Advantage Fund – Balanced Fund – These funds are a mix of debt and equity. They are ideal for investment for a duration of 2–3 years. This fund gave returns around 18% per annum in the last year. Minimum SIP amount for this fund is ₹ 1000.

Tata Retirement Savings Fund (Moderate Plan) – Balanced Fund – Another balanced fund, this one has given a stellar return of 38% in the last 1 year which is incredible for a balanced fund. Minimum SIP amount for this fund is ₹ 500.

For 4 or More Years – Multi-cap Funds

Multicap funds are good to start investing in equities for beginners. Because of the flexibility of investing all type of companies irrespective of size, the fund manager can generate better risk-adjusted returns. Here is the best fund for this category:

Funds Type
Motilal Oswal MOSt Focused Multicap 35 Fund Diversified Equity (Multi Cap)

Motilal Oswal Multicap 35 Fund – Multi Cap Fund – multi cap funds are slightly riskier than large cap funds though not as risky as small and mid-cap funds. Aim to invest at least for 5 years. It gave around 42% returns in the last 1 year. Minimum SIP amount for this fund is ₹ 1000.

For 4, 5, 6, and more years – Equity Funds

Equity Funds invest most of the money gathered from investors into the stock market. The risk level in equity mutual funds are quite high and investors are advised to invest in these funds as per their risk appetite.

Funds Category
Mirae Asset India Opportunities Fund Large Cap
SBI Bluechip Fund Large Cap
Aditya Birla Sun Life Small & Midcap Fund Mid Cap
HDFC Small Cap Fund Small Cap
L&T Emerging Businesses Fund Small Cap
 A brief about the Fund:

L&T Emerging Businesses Fund – Small Cap Fund- invest for at least 6 years to avoid market risks. Gave returns of nearly 67% in the last year. Minimum SIP amount for this fund is ₹ 500.

HDFC Small Cap Fund – Small Cap Fund – again, invest for at least 6 years. Returns were in excess of 60% in the last 1 year. Minimum SIP amount for this fund is ₹ 500.

Aditya Birla SL Small & Midcap Fund – Midcap Fund – invest for at least 5 years. It is less riskier than the funds mentioned above. Gave above 55% in the last year. Minimum SIP amount for this fund is ₹ 1000.

SBI Bluechip Fund – Large Cap Fund – Invest for at least 4 years. It is one of the most popular large cap funds which has given very consistent results. In the last 1 year, it gave returns of around 30%. Minimum SIP amount for this fund is ₹ 500.

Mirae Asset India Opportunities Fund – Large Cap Fund – another very good option, invest for at least 4 years in this fund. Minimum SIP amount for this fund is ₹ 1000.

Summary

In this article, we covered best options to get started with mutual funds. If you want to see more mutual fund options, refer to this list: 30 Best mutual funds to invest in 2018.

Things to Remember

  • Higher rates: don’t blindly invest in the fund with the highest returns. Invest based on the duration you want to invest for.
  • Every person’s financial condition is different. Evaluate the funds you invest in yourself – don’t invest in a fund because of its popularity.
  • Review your investment from time to time but not too often. Once a few weeks is good enough.

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.