Rapid digitisation and modernisation of the Indian investment landscape, along with the growing participation of retail investors, have led to an exponential growth in investments like mutual funds. However, given the high economic diversity in the Indian demography, not every investor can afford to invest the same amount. While some can invest in lakhs, some in thousands, others can invest in hundreds. Furthermore, unlike investors with substantial investment capacity, investors with limited corpus are rarely aware of the opportunities available to them. This makes such investors skip investments altogether.
Therefore, this blog attempts to answer the question, “What is the mutual fund minimum investment amount?” This can help investors decode if a key investment medium, like mutual funds, can be within their means or not.
Mutual Fund Minimum Investment Amount
There is no legal cap on the amount of money you invest in a mutual fund, meaning there are no minimum or maximum investment restrictions. However, different fund houses or Asset Management Companies (AMC) set their own minimum investment limit for their mutual fund scheme.
For example, XYZ mutual fund house can allow investors to begin SIP investments from ₹100 for their equity large-cap scheme, while ABC fund house sets the minimum limit at ₹500 for the same scheme.
Investors can invest in a mutual fund either in a lump sum or through a Systematic Investment Plan (SIP). The unique minimum limit set by the AMC can vary based on the medium of investment chosen, that is, SIP or lump sum.
Minimum SIP Investment in Mutual Funds
Unlike a one-time lump sum investment, a Systematic Investment Plan allows investors to invest a fixed amount periodically over a particular tenure. Since the total investment gets fragmented over periodic intervals, investors no longer need a high corpus to begin their investment journey.
When it comes to minimum SIP investment, an investor needs to consider two factors.
- Minimum SIP limit of AMC: Different AMCs might have different minimum amount requirements to begin mutual fund investing through SIP. Currently, in India, SIP investments can begin from ₹100. However, other AMCs can have a minimum SIP contribution of ₹500 or ₹1,000 and so on. Therefore, the investor has to analyse the minimum investment requirement of the particular mutual fund scheme they want to invest in.
- Minimum amount required to earn the desired result: Every investor begins their investment journey with a goal to build a certain corpus. Therefore, using an SIP calculator, an investor can choose the amount of SIP contribution they need to make to get the return they want.
For instance, Mr P wants to build a ₹20 lakh. Therefore, he chooses the XYZ mid-cap equity mutual fund, which has a minimum SIP investment requirement of ₹100. Using a calculator, Mr P decides to invest ₹5,000 per month. Assuming a standard 12% return, his corpus after 15 years would be ₹25,22,880.
While SIP is among the most favoured mutual fund investment mediums, some investors also choose to make a lump sum investment.
Minimum Lump Sum Investment
When investors invest a one-time, lump sum contribution to a mutual fund scheme, it is called a lump sum investment in a mutual fund. Just like SIP, there is no legal minimum limit to the lump sum investment in India. Therefore, investors can invest any amount as a lump sum mutual fund investment, provided that it satisfies the minimum requirement set by the AMC or fund house in question.
There are two factors that should be considered here.
- Minimum lump sum investment limit set by the AMC: Usually, since a lump sum investment is a one-time investment, the minimum limit set for it by a fund house or AMC is higher than SIP investments. The minimum lump sum investment limit usually ranges from ₹1,000 to ₹5,000 for retail investors. However, investors must check the fact sheet of the particular fund they want to invest in to analyse their minimum investment limit.
- Minimum amount that the investor wants to invest: Similar to SIPs, the investor can use a lump sum mutual fund calculator to determine the minimum amount they need to invest to fulfil their financial goals.
For instance, Mr P invested ₹1,00,000 in a lump sum into the ABC small-cap equity fund. If a standard 12% return is considered, his corpus after 20 years would be ₹9,64,629.
However, a question remains. Given that there is a range of mutual fund schemes, an investor might wonder if the minimum investment amount varies with schemes.
Minimum Investment Across Fund Types
The mutual fund landscape in India has been categorised into different equity, debt, and hybrid categories. AMCs offer mutual fund investment schemes across these categories. The minimum investment amount can vary based on the types of mutual funds.
- Same Fund Type, Different AMCs: The minimum investment amount can vary between AMCs, offering the same mutual fund type. For example, in the small-cap fund category, the Bandhan Small Cap Fund SIP starts from ₹100, while the SBI Small Cap SIP starts from ₹500.
- Same AMC, Different Fund Types: Even in the same fund house, different mutual fund investment schemes can have different minimum investment requirements. For example, the minimum investment for the Nippon India Large Cap Fund is ₹100, whereas the Nippon India Small Cap Fund starts from ₹5,000.
Therefore, the minimum investment amount requirement depends entirely on the fund-specific policy of the fund house. Therefore, analysing the fund’s fact sheet is critical for the investor to determine if a particular mutual fund meets their needs.
However, an AMC does not arbitrarily determine the minimum investment for their mutual fund scheme. The decision is based on certain key considerations.
Factors Deciding Minimum Investment
Discussed here are the various factors that an AMC considers to decide the minimum investment amount for their mutual fund scheme.
- Type of Fund: In comparison to passive index funds, actively managed funds may have a higher minimum investment requirement due to their increased research and management expenses. Elevated admission restrictions may also apply to specialised funds that target certain asset classes or geographic areas.
- Target Investor Profile: Some funds intentionally keep the minimum commitment low to maximise participation since they are created with regular investors in mind. Others have greater minimums to reflect the associated risk and complexity of management and are designed for institutional, high-net-worth, or experienced investors.
- AMC Policy: Even within the same fund category, different fund houses have different internal policies regarding minimum investment limits. Depending on their target market and distribution plan, two AMCs operating in a similar category of funds may establish differing minimum SIP or lump sum levels.
- Mode of Investment: Regular plans and direct plans under the same fund may have differing minimum investment requirements. In the same way, minimum additional investment amounts add a third threshold, while lump sum and SIP minimums are determined separately.
Can You Invest with ₹100 or ₹500
The minimum investment amount required to invest in mutual funds varies with the AMC, fund category, medium of investment (lump sum or SIP), etc. Therefore, before investing, the investor should analyse the minimum limit of the particular fund. In general, SIP investment in mutual funds can begin with as little as ₹100 or ₹500, while lump sum investing has a minimum limit of around ₹1,000.
However, it is important to remember that despite AMC limits, investors should determine their periodic or lump sum contribution based on the corpus they want to build through the investment. A mutual fund calculator can help investors try various permutations and combinations of mutual fund contributions and tenure to determine their investment strategy.
FAQ‘s
While there is no legal minimum limit to invest in a mutual fund, different AMCs set their own minimum limit. Many fund houses enable investors to begin investment with ₹100, while others can have ₹500 as the minimum limit. Therefore, before investing in a mutual fund scheme, an investor should check the fund’s fact sheet.
Whether you can invest ₹500 in a mutual fund scheme depends on the particular scheme and its AMC. While there is no legal minimum limit to invest in a mutual fund, different AMCs set their own minimum limit. This minimum limit can be ₹100, ₹500, or other amounts. Therefore, before investing, an investor should check the fund’s fact sheet.
No, all funds do not have the same minimum amount. Different AMCs set their own minimum limit. The limit also varies with factors like mutual fund type, medium of investment (that is, SIP or lump sum), etc.
A Systematic Investment Plan enables investors to invest a specified amount at regular intervals over a certain length of time. As the whole investment is split at regular intervals, investors no longer require a large sum to begin their investment journey. Minimum investment limit for SIPs is often ₹100 or ₹500.
