How to Start a Mutual Fund Investment with Just Rs. 500
by Admin
Savings in mutual funds is very beneficial for constructing wealth and one does not have to invest a lot of money for the same. Starting capital required to kick start your investment plan is as low as Rs. 500. To guide you to the process of participating in the Indian Market here is a step by step procedure.
Why Mutual Funds?
A mutual funds are one where a large number of investors pool there money in advance so that it can be use to purchase multiple stocks, bonds or other securities. They offer several benefits:
- Diversification:In other words all your investment should not be put in a single form of property to avoid high risks.
- Professional Management: Fund managers make investment decision based of available information.
- Accessibility: Invest with small amounts and be rewarded from large amounts of invested money.
Steps to Start Investing
1. Investors Guide to Picking the Right Mutual Fund
Therefore, choosing the best mutual fund is a function of the investor’s objective, his ability to bear risk, and time horizon. Here are some common types of mutual funds available in India:
| Mutual Fund Type | Description | Suitable For |
|---|---|---|
| Equity Funds | Invest primarily in stocks. High risk, high return. | Long-term growth |
| Debt Funds | Invest in bonds and fixed-income securities. Lower risk. | Steady income, safety |
| Hybrid Funds | Combination of equity and debt. Balanced risk. | Balanced growth and income |
| Liquid Funds | Invest in short-term instruments. Very low risk. | Parking emergency funds |
2. Complete KYC Process
Any investment requires you to go through the Know Your Customer (KYC) requirements first. This entails availing of identification documents such as I.D photos, passport, or driver’s license, and proof of residence. KYC can be done online or at the mutual fund company’s office.
3. Open an Account
Information for the selection of mutual funds is available within a mutual fund company or in an information platform that presents a large number of mutual funds. You can only open an account with the help of an Internet connection and their internet site and the application they provided.
4. Begin with Systematic Investment Plan (SIP)
This refers that you invest a fixed sum, let’s say Rs. 500 in this case at regular intervals – monthly or quarterly for instance. This assists in levelling the cost of acquisition and the returns from the rupee cost averaging effect.
5. Monitor Your Investments
Make it a practice to check on your mutual funds so that you will see if they are compatible with your budget. It is also significant to point that all the strategies suggested should be modified correspondingly depending on its effectiveness and the changes in the financial situation.
Example of Investment Growth
Here’s a hypothetical example showing how a monthly SIP of Rs. 500 can grow over time with an assumed annual return of 12%:
| Investment Period | Total Investment | Estimated Value |
|---|---|---|
| 1 Year | Rs. 6,000 | Rs. 6,769 |
| 3 Years | Rs. 18,000 | Rs. 23,436 |
| 5 Years | Rs. 30,000 | Rs. 41,658 |
Note: The above values are just assumptions and not real values for purpose of this example let us assume that they are as indicated in the table above. Actual returns may vary.
Using Mutual Fund Screeners
To help you choose the right mutual fund, you can use IpoTec's mutual funds screener. This tool help one to narrow and contrast one or more mutual fudns depending on some aspects like performance, risk, type etc.
Conclusion
It is quite possible to start investing in mutual funds with as little money as Rs. 500 and still be making a good investment. Long term investing and right selection of funds will help in achieving one’s financials objectives in the long run. It is important to revisit your investments so that you can check on them and possibly rearrange them to fit the plan.
For more information on mutual funds and investment tools, visit IpoTec.
Happy investing!