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 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:

FundsType
ICICI Prudential Money Market FundLiquid
Axis Liquid FundLiquid
Reliance Money Manager FundUltra Short Term
ICICI Prudential Flexible Income PlanUltra 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)

FundsType
Franklin India Low Duration FundUltra Short Term
Tata Liquid FundLiquid

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.

FundsType
Indiabulls Short Term FundShort 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:

FundsType
Franklin India Short Term Income PlanShort Term Debt
Reliance Banking & PSU Debt FundShort Term Debt
HDFC Banking and PSU Debt FundShort 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.

FundsType
Reliance Regular Savings Fund – Balanced OptionHybrid Equity

SIPs for balanced funds

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

FundsType
Franklin India Balanced FundHybrid Equity (Balanced)
DSP BlackRock Balanced FundHybrid Equity (Balanced)
SBI Magnum Balanced FundHybrid Equity (Balanced)
Tata Balanced FundHybrid Equity (Balanced)
UTI Balanced FundHybrid 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

FundsType
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

FundsType
Franklin India High Growth Companies FundDiversified Equity (Multi Cap)
SBI Magnum Multi Cap FundDiversified Equity (Multi Cap)
Kotak Select Focus FundDiversified 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:

FundType
DSP BlackRock Tax Saver FundELSS
Reliance Tax Saver (ELSS) FundELSS
ICICI Prudential Long Term Equity Fund (Tax Saving)ELSS
Franklin India TaxshieldELSS
Axis Long Term Equity FundELSS
Aditya Birla Sun Life Tax Relief 96ELSS

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.

FundsCategory
Quantum Long-Term Equity FundLarge Cap
SBI Bluechip FundLarge Cap
L&T India Value FundMid Cap
Franklin India Prima Fund Mid Cap
DSP BlackRock Small and Midcap FundMid Cap
Franklin India Smaller Companies FundSmall Cap
Reliance Small Cap FundSmall 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)