What Is the Minimum Investment for a Mutual Fund?

Just as there is a minimum age to vote, drive a car, or get married, there is also a minimum requirement to invest in mutual funds. But instead of age, it is the value. The mutual fund minimum investment amount can vary depending on the scheme and the type of investment you choose.

Understanding these limits is crucial as it helps you plan your investments effectively and ensures you are making informed decisions about your investments.

What is the minimum amount to invest in mutual funds?

The minimum amount required to invest in a mutual fund refers to the least amount of money you need to contribute to a particular scheme. Each mutual fund scheme has its own minimum investment limit set by the Asset Management Company (AMC). If your investment is below this threshold, it will not be accepted.

In most cases, you can start with small monthly investments, typically ranging from Rs 100 to Rs 5,000. However, it is important to check the specific minimum investment in mutual funds you are interested in, as these limits can vary depending on the type of fund, the investment method, and the AMC. For instance, the minimum lump sum investment in mutual funds may differ from investments made through Systematic Investment Plans (SIPs).

What are the different ways of investing in a mutual fund?

There are typically two ways of investing in a mutual fund, as explained below:

• Lump sum investments: A lump sum investment is a one-time investment in a mutual fund scheme of your choice. You can decide the amount you want to invest as long as it meets or exceeds the minimum investment requirement set by the mutual fund. Once you make the investment, there is no obligation to add more funds. However, you may choose to invest more, if you wish. This method allows you to invest a larger amount at once, which can be suitable if you have a lump sum of money available to invest.
• SIPs: SIPs allow you to invest a fixed amount regularly, such as monthly, quarterly, weekly, or annually, depending on your preference and the scheme’s terms. You can select an amount based on your goals and invest the same over the chosen period. You can also periodically increase the amount. Mutual funds have minimum investment limits for SIPs as well, which can vary across schemes.

Other than this, there is a third less popular way to invest in mutual funds, which is through NFOs.

• NFOs: New Fund Offers (NFOs) are new mutual fund schemes that are offered to the public for investment for the first time. These schemes also come with a minimum investment value, and the unit price is usually set at Rs 10.

Could the minimum investment requirement decrease moving forward?

The minimum amount to invest in mutual funds might go lower in the future. Currently, most fund houses have SIPs with a minimum investment of at least Rs 1,000 a month. However, some fund houses offer SIPs starting at Rs 500, and a few even allow investments as low as Rs 100 per month.

Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), has stated that looking ahead, over the next three years, more investors will be able to invest in mutual funds through SIPs with a minimum of just Rs 250 a month. This shift is expected to make mutual fund investments more accessible to a larger number of people.

How do you select the right investment amount for your needs?

Regardless of the mandated mutual fund minimum investment amounts, it is important first to evaluate your goals. You must know what you are saving for. For example, if you are investing for long-term goals, such as retirement, you have a long investment horizon. In this case, you can start small and gradually increase your contributions over time.

However, if you are investing for a relatively near-term goal, like funding your child’s education in five years, you may need to invest a larger amount depending on the total amount you will need at maturity. Using a lump sum or SIP calculator can be very helpful in calculating the required contribution. These calculators can help you determine the right investment amount as per your investment budget and needs.

Conclusion

It is important to remember that the minimum investment limits for mutual funds can change over time. These limits can also vary significantly between different funds and fund houses, so it is essential to check the specific requirements before investing. Always review all the details carefully and consult the AMC if you have any doubts. Additionally, while there is a minimum investment amount, it can be beneficial to consider higher investment values and gradually increase your contributions. This can help you reach your financial goals more quickly and effectively.

An investor education initiative by Edelweiss Mutual Fund

All Mutual Fund Investors have to go through a one-time KYC process. Investors should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit - https://www.edelweissmf.com/kyc-norms  

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME-RELATED CAREFULLY