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 and even ₹100.

And this can be done by investing in mutual funds via SIP ( Systematic Investment Plans).

Let us understand the two terms and is they really differ from each other.

Mutual Fund vs SIP

SIP stands for Systematic Investment Planning. It allows you to invest systematically i.e weekly, monthly or quarterly based on your preference. Now you must have been thinking – where to invest?

With the help of SIPs, you are investing in mutual funds.

In other words, SIP is a tool by which you can invest in mutual funds.

SIP is a method of mutual fund investment and not a type or comparable investment instrument.

The other tool for investing in a mutual fund is a lump sum amount or one-time investment.

SIP  is a very smart and hassle-free way to invest in mutual funds. Unfortunately, many investors, especially new ones, think SIP is an investment by itself, while it actually is a way to invest in mutual funds.

Let us discuss it in detail.

A mutual fund is a financial instrument, which pools your and other investor’s money in stock market if you opt for an equity mutual fund.

If you opt for a debt mutual fund, and the money is invested in treasury bills, Government Securities, Corporate Bonds and Money Market instruments. Your money is invested in a mix of stocks and bonds if you choose a hybrid fund.

So, if you do not wish to invest in the market directly or you do not want to take a high risk but want to invest in the market with low risk, then mutual funds offer you great schemes based on your needs and objectives.

To invest in these mutual funds, there are two methods you can choose from. First through a lump sum and second through Systematic Investing Plan (SIP).

A lump sum is a single large investment done by an investor in one go. A debt mutual fund is generally preferred for this kind of investment.

Whereas, an SIP is an option of investing a fixed sum in a mutual fund scheme on a regular basis i.e. predefined regular interval. It is similar to regular saving schemes like a recurring deposit.

It is a tested method of minimizing risk and yet enjoying good returns, by regular, periodic investment, over a long period of time.

Read More: 9 Reasons Why SIP Investment Is the Best Way to Invest

SIP is the ideal method to invest in the equity market as it involves staggering your investments over the whole financial year. It will help you to average the cost of purchase and beat volatility.

Also, it brings financial discipline to your life.

Hope you understand by now that an SIP is not a different type of investment. It is just another way of saying ‘monthly investment’.

There are several benefits of investing in Mutual Fund via SIPs i.e. a fixed amount every month:

  1. Easier to save and invest: It is easier to save small amounts of money regularly than a big amount in one go. And create wealth using small investment.
  2. Stock markets are volatile: Some months they are high and some months they are low. So investing each month averages out the purchase price.
  3. Discipline: Saving and investing every month instills discipline in the investor to stick to a plan in spite of market ups and downs.
  4. Fewer decisions: You don’t have to decide every month how much to invest and which funds to invest in.

Because of these benefits sometimes the popular media talks of SIPs as if they are an investment class of their own. But they are just another name for monthly installments in mutual funds.

5 Best Mutual Funds for SIP

Here is the list of 5 best mutual funds you can choose in 2018. This list consists of funds from every type of equity oriented mutual fund.

1. SBI Bluechip Fund

This is a Large Cap Equity Oriented Mutual Fund launched on January 1, 2013. It is a fund with moderately high risk and has given a return of 18.03% since its launch.

Returns per annum over the years from this fund are :

Duration Returns
1 year  15.01%
3 years  10.64%
5 years  20.68%

Invest in SBI Bluechip Fund Now

Rating by Groww 4 star
AUM (Fund Size) ₹17869 Cr
Minimum SIP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark BSE S&P 100 since its launch.
Age of the fund 5 years old
Expense Ratio 1.35%

Despite its name, the fund tilts towards a multi-cap approach in its allocations.

It invests in the top 100 companies in terms of market capitalization, with the flexibility to invest up to 20% in mid-cap stocks.

This fund is one of the most popular large-cap funds available in the market.

2. Mirae Asset Emerging Bluechip Fund

This is a mid-cap equity oriented mutual fund launched on January 1, 2013.

It is a fund with moderately high risk and has given a return of 23.40% since its launch.

Returns per annum over the years from this fund are:

Duration Returns
1 year  16.45%
3 years  19.82%
5 years  32.34%

Invest in Mirae Asset Emerging Bluechip Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹5,364 Cr
Minimum SIP ₹1000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Nifty Free Float Midcap 100 since its launch.
Age of the fund 5 years old
Expense Ratio 1.73%

The standout feature of this fund is its ability to hold onto its five-star ranking without even a small blip since it made its debut in the ratings.

3. HDFC Small Cap Fund

This is a Small Cap Equity Oriented Mutual Fund launched on January 1, 2013. It is a fund with high risk and has given a return of 23.99% since its launch.

Returns per annum over the years from this fund are:

Duration Returns
1 year  35.28%
3 years  24.84%
5 years  26.79%

Invest in HDFC Small Cap Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹2152 Cr
Minimum SIP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY Smallcap 100 TRI since its launch.
Age of the fund 5 years old
Expense Ratio 0.93%

The standout feature of this fund is its ability to hold onto its five-star ranking without even a small blip since it made its debut in the ratings.

The scheme aims to provide long-term capital appreciation by investing predominantly in small-cap and mid-cap companies.

4. Motilal Oswal MOSt Focused Multicap 35 Fund

This is a  Multi Cap Equity Oriented Mutual Fund launched on April 28, 2014.

It is a fund with moderately high risk and has given a return of 29.80 % since its launch.

Returns per annum over the years from this fund are:

Duration Returns
1 year  16.51%
3 years  18.96%
5 years  NA

Invest in Motilal Oswal MOSt Focused Multicap 35 Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹11411 Cr
Minimum SIP ₹1000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY Smallcap 100 TRI since its launch.
Age of the fund 4 years old
Expense Ratio 1.49%

A very recent entrant to the category, this fund has delivered a good show in the three years since launch and also has a unique mandate.

It has recently entered the rankings with a five-star rating, making its debut with a bang.

5. Tata Retirement Savings Fund

This is a Hybrid Equity Oriented Mutual Fund launched in January 9.2013.

It is a fund with a moderately high risk and has given a return of 20.25% since its launch.

Returns per annum over the years from this fund are:

Duration Returns
1 year  15.27%
3 years  15.64%
5 years  22.50%

Invest in Tata Retirement Savings Fund – Moderate Plan Now

Rating by Groww 4 star
AUM (Fund Size) ₹574 Cr
Minimum SIP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Hybrid 25+75 Aggressive Index since its launch.
Age of the fund 5 years old
Expense Ratio 1.52%

The fund seeks to provide a financial planning tool for long-term financial security for investors based on their retirement planning goals.

Following the 3 things you should always remember before investing in mutual funds:

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

Read More: 10 Tips on Investing in Mutual Funds

To look at some of the best performing funds from every category of mutual funds, check out Groww 30 best mutual funds to invest in 2018.

Happy Investing!

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