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 Rs 500. SIP (Systematic Investment Plans) of a lot of mutual funds allow min investment with just Rs 500.

Now coming to the topic: Best mutual funds to with Rs 500. 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 second question then remains – what mutual funds allow me to invest as low as Rs 500.

The minimum limits are typically different for lump sum and SIP plans. Let’s look at a couple of examples.

Parking Your Cash

If your goal is to park your cash, you can either consider a liquid fund or an ultra short term fund. There are a bunch of funds that have minimum investment as Rs 500 or low.

Here is a list of some good ones:

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Parag Parikh Long Term Equity Fund Direct Growth -3.22% 11% 11.62% 1.33% 229% Equity
(Multi Cap)
Moderately High
4.48% 10.68% 17.23% NA NA NA
(NA)
Moderately High

SIP Plans to Park Cash

Here are some more Ultra Short Term Funds and Liquid Funds that allow you to do SIP for Rs 500 (however lump sum limit amount is higher)

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Franklin India Low Duration Direct Plan Growth 8.81% 8.84% 9.36% 0.49% NA Debt
(Low Duration)
Moderate
ICICI Prudential Liquid Fund Direct Plan Growth 7.4% 7.1% 7.63% 0.2% NA Debt
(Liquid)
Low

Saving for Short Term

If you goal is to save for a short term goal like buying a car or buying a house within 3 years, short term debt funds are good. I could find only one short term debt fund that allows investment of Rs 500.

Fund
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Indiabulls Short Term Fund Direct Growth 9.06% 8.23% 9.2% 0.48% NA Debt
(Short Duration)
Low

SIP Plans for Short term Debt Funds

However, there are many Short Term Debt funds that allow SIP of Rs 500. Here they are:

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Franklin India Ultra Short Bond Fund Super Institutional Direct Growth 9.9% 8.94% 9.32% 0.42% NA Debt
(Ultra Short Duration)
Moderate
Reliance Banking & PSU Debt Fund Direct Growth 11.56% 8.23% NA 0.36% NA Debt
(Banking & PSU)
Moderately Low
HDFC Banking and PSU Debt Fund Direct Growth 10.59% 8.16% 8.92% 0.36% NA Debt
(Banking & PSU)
Moderate

Balanced Funds With Rs 500

Balanced Funds are good to build a diversified portfolio of debt and equity. And better than buying different equity and debt funds because there is no tax implication on the debt proportion.

Balanced funds also give the flexibility to fund manager to change the debt and equity proportion depending on the market situation. There is one balanced fund as of today that allows you invest Rs 500 in lump sum mode.

Fund
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Reliance Equity Savings Fund Direct Growth -5.96% 4.78% NA 1.34% 563% Hybrid
(Equity Savings)
Moderately High

SIPs for Balanced Funds

Here are some good mutual funds that you can start SIP with just Rs. 500.

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Tata Balanced Advantage Fund Direct Growth NA NA NA 0.84% NA Hybrid
(Balanced Advantage)
Moderately High
UTI Hybrid Equity Fund Direct Fund Growth -9.14% 4.76% 6.88% 1.17% NA Hybrid
(Aggressive)
Moderately High
SBI Equity Hybrid Fund Direct Plan Growth 1.51% 9.33% 11.27% 1.1% 252% Hybrid
(Aggressive)
Moderately High
Franklin India Equity Hybrid Fund Direct Growth -3.08% 5.88% 10.19% 1.08% 56% Hybrid
(Aggressive)
Moderately High

SIPs for Diversified Funds

However, For SIP there are many good mutual funds to start with Rs. 500

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
SBI Magnum MultiCap Fund Direct Growth -4.77% 8.63% 12.49% 1.09% 65% Equity
(Multi Cap)
Moderately High
Kotak Standard Multicap Fund Direct Growth -4.88% 10.09% 12.96% 0.76% 14% Equity
(Multi Cap)
Moderately High

Saving Tax

Great way to save tax on your hard earned money. Under section 80C, you can invest upto 1.5 lac tax-free. These funds have lockin of 3 years unlike 10 to 15 years for PF.

In addition, you get to participate in equities – in long term equities are performing better because of growth of our country.You can start with almost any ELSS (Tax saving funds) with Rs 500 (both Lumpsum and SIP). Here are some good funds for tax saving:

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
Reliance Tax Saver (ELSS) Fund Direct Growth -19.87% -1.19% 4.08% 1.27% 76% Equity
(ELSS)
Moderately High
Franklin India Taxshield Direct Growth -8.7% 5.21% 9.57% 0.99% 12% Equity
(ELSS)
Moderately High
Axis Long Term Equity Direct Plan Growth -4.56% 10.7% 12.88% 0.93% 40% Equity
(ELSS)
Moderately High
Aditya Birla Sun Life Tax Relief 96 Direct Growth -12.75% 7.37% 11.38% 0.99% 1% Equity
(ELSS)
Moderately High

Equity Funds with Rs 500 SIP Plans

Although there are very few equity funds that allow lump sum investment of Rs 500, there are many good ones that allow SIP for Rs 500.

List of Funds
Fund Name 1Y 3Y 5Y Expense Ratio Turnover Ratio Category Risk
SBI Bluechip Direct Plan Growth -6.16% 6.38% 10.3% 1.1% 73% Equity
(Large Cap)
Moderately High
L&T India Value Fund Direct Growth -13.07% 6.36% 11.37% 0.9% 25% Equity
(Value)
Moderately High
Franklin India Prima Direct Fund Growth -11.61% 4.82% 11.88% 1.05% 6% Equity
(Mid Cap)
Moderately High
DSP Midcap Direct Plan Growth -9.61% 6.32% 12.53% 1.0% 23% Equity
(Mid Cap)
Moderately High

Summary

In this article, we covered various options to get started with mutual funds with as low as Rs 500. At the moment it appears that the choice is limited for lump sum investments.

However, for SIP investments, there are many good funds available for all your needs. Mutual funds companies are working to reduce the min investment to increase the investor base. Some schemes allow an even lower amount for their systematic investment plans (SIP).

Disclaimer: All data is as on the date of publishing (Jan 25, 2017)

 

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