Investors are quickly embracing mutual funds, particularly in light of the market’s ongoing introduction of novel fund variations. Mutual funds offer options for risk-takers and risk-averse investors, including conventional choices like equities, debt, and hybrid funds.
Aside from their preferences for risk and return, investors can choose schemes based on their investment objectives, time horizons, and investment goals. These also provide a great deal of freedom regarding the choice of fund, when to invest, and how to withdraw from an investment.
Most individuals who first start with mutual fund investments frequently ponder the ideal investment amounts.
Minimum Investment Amount for Mutual Funds
Most Indians are unaware of the modest amount of money invested in mutual funds. They also believe that to start and avoid making investments. They require large sums of money. This is untrue, though. Depending on the Asset Management Company (AMC) and the mutual fund scheme that an investor chooses to invest in, the minimum investment amount in most of them ranges from Rs. 500 to Rs. 5000.
Some domestic mutual funds, however, also accept a minimum commitment of Rs. 100 from clients who prefer to invest smaller sums.
What is the minimum that can be invested in mutual funds?
The minimum investment that can be made will differ amongst funds. These funds do adhere to a few standard procedures, though. Here is a quick summary of the required minimum investment.
The AMC typically fixes the minimum investment for new fund offerings (NFO) at Rs. 5,000 per application. This is done more so to obtain affordable application units. Most of the time, this is the standard. For debt funds, the minimum investment is typically higher.
The standard minimum investment for lump-sum purchases is Rs. 5 000. The fund houses, however, only demand this for the initial investment. Additionally, subsequent investments can start at just Rs. 1,000. The vast majority of funds consistently operate in this manner.
The minimum investment for SIP is Rs. 500 for each SIP deduction. For instance, you can request a monthly debit of as little as Rs. 500 if you participate in a monthly SIP. Although some mutual funds may allow SIPs to start as low as Rs. 100, the norm is to need a minimum commitment of Rs. 500.
How to invest in a lump-sum?
If you’re considering investing a lump sum in a mutual fund, you can ask a financial advisor to act on your behalf or get in touch with the asset management firm directly. The KYC form must be filled out, and supporting documentation must be submitted to create your mutual fund account.
Consider the state of the market after that. The future value of a portfolio might decline significantly if a lump sum was invested at a market peak. Wait until conditions in the market are more favourable and valuations are on the lower side.
In the interim, you might put the money into a debt fund, a liquid fund, or conventional savings methods. A different option is to put money into a Systematic Transfer Plan (STP). You can invest a lump sum of cash through an STP in a liquid or market fund, from which a predetermined amount will be transferred to an equity fund each month. Similar to a SIP, but with the added possibility of profit from the initial lump sum investment.
In the past, it has been seen that investors who can commit to mutual funds for a long time have the best returns. The optimum SIP amount should be chosen to enable the investor to continue investing for a long time without running out of liquid funds.