Best Mutual Funds To Invest With Rs 500: SIP and Lumpsum

mutual fund rs 500

The best thing about mutual funds is that they enable you to invest with very small amounts. 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 you goal is to park your cash, you can either consider a liquid fund or an ultra short term fund. There are bunch of funds that have minimum investment as Rs 500 or low. Here is list of some good ones:

Funds Type
ICICI Prudential Money Market Fund Liquid
Axis Liquid Fund Liquid
Reliance Money Manager Fund Ultra Short Term
ICICI Prudential Flexible Income Plan Ultra Short Term

SIP plans for parking 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)

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

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.

Funds Type
Indiabulls Short Term Fund Short Term Debt

SIP plans for short term debt funds

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

Funds Type
Franklin India Short Term Income Plan Short Term Debt
Reliance Banking & PSU Debt Fund Short Term Debt
HDFC Banking and PSU Debt Fund Short Term Debt

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.

Funds Type
Reliance Regular Savings Fund – Balanced Option Hybrid Equity

SIPs for balanced funds

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

Funds Type
Franklin India Balanced Fund Hybrid Equity (Balanced)
DSP BlackRock Balanced Fund Hybrid Equity (Balanced)
SBI Magnum Balanced Fund Hybrid Equity (Balanced)
Tata Balanced Fund Hybrid Equity (Balanced)
UTI Balanced Fund Hybrid Equity (Balanced)

Diversified funds for long term

Diversified funds are good to start investing in equities. Because of flexibility of investing all type of companies irrespective of size, fund manager can generate better risk-adjusted returns. There is only one fund with minimum investment of Rs 500 in lumpsum

Funds Type
Quantum Equity FoF Fund Diversified Equity (Multi Cap)

SIPs for diversified funds

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

Funds Type
Franklin India High Growth Companies Fund Diversified Equity (Multi Cap)
SBI Magnum Multi Cap Fund Diversified Equity (Multi Cap)
Kotak Select Focus Fund Diversified Equity (Multi Cap)

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:

Fund Type
DSP BlackRock Tax Saver Fund ELSS
Reliance Tax Saver (ELSS) Fund ELSS
ICICI Prudential Long Term Equity Fund (Tax Saving) ELSS
Franklin India Taxshield ELSS
Axis Long Term Equity Fund ELSS
Birla Sun Life Tax Relief 96 ELSS

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.

Funds Category
Quantum Long-Term Equity Fund Large Cap
SBI Bluechip Fund Large Cap
L&T India Value Fund Mid Cap
Franklin India Prima Fund Mid Cap
DSP BlackRock Small and Midcap Fund Mid Cap
Franklin India Smaller Companies Fund Small Cap
Reliance Small Cap Fund Small Cap

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)