Investing in mutual funds has become increasingly accessible to everyone, with the option of starting with as little as ₹1000. Through Systematic Investment Plans (SIPs), individuals can invest a sum of money regularly, be it weekly, monthly, or quarterly, based on their convenience and chosen mutual fund scheme. In this article, we will explore the concept of investing ₹1000 in mutual funds and highlight the essential factors to consider before making such an investment.
Factors to consider before investing
Before leaping into mutual fund investments, there are crucial factors to remember. Considering these factors, you can make informed decisions aligning with your investment goals and risk appetite.
Investment objective
Defining your investment goal and time horizon is crucial in finding a scheme that best suits your needs. While the ₹1000 investment scheme may not be ideal for those seeking regular interest earnings, it could be suitable for individuals aiming for long-term capital growth.
Appetite for risk
The amount you are willing to invest correlates with the level of risk you are prepared to take. Investments with higher risk profiles might have lower initial fees but require more frequent contributions. It is essential to assess your tolerance for potential losses and always maintain sufficient emergency funds to handle adverse situations.
Performance of a scheme
Rather than solely focusing on a scheme that aligns with your goals, it is essential to evaluate its performance. Assess whether the scheme has consistently met expectations and delivered favourable returns. This analysis allows you to gain confidence in the scheme's ability to help you achieve your investment objectives.
Credentials of the fund house
Researching the credentials of the fund house offering the SIP plan is crucial. Ensure that you invest in a scheme managed by a reputable fund house with a history of delivering good returns and demonstrating stability. This step will help instil confidence in the scheme's potential for long-term success.
Additional costs
While the SIP amount may fit your budget, it is essential to consider any additional fees associated with the scheme. High fees could affect the overall cost-effectiveness of investing in a particular scheme. Analysing these costs will enable you to make a well-informed decision that aligns with your financial objectives.
Best mutual funds under ₹1000
To assist you in making investment decisions, we have curated a list of some of the best mutual funds available for a minimum investment of ₹1000. These funds have demonstrated strong performance records and offer potential growth opportunities.
UTI NIFTY50 index fund
Launched by UTI Mutual Fund in 2000, The Fund endeavours to replicate the underlying index of NIFTY50. It is a passively managed fund that attempts to minimise the return differential between the fund and the underlying index. With a primary goal of capital growth in tune with the index returns and a secondary goal of passive income generation, this scheme offers investors equity exposure at a relatively cheaper cost. As of 7 July 2023, the expense ratio is 0.2%, and the Net Asset Value (NAV) is ₹130.40.
Canara robeco blue chip equity fund
ICICI robeco mutual fund introduced the Canara robeco blue chip equity fund in 2013. This low-risk scheme aims for long-term capital appreciation by predominantly investing in companies having a large market capitalization. The expense ratio for this scheme is 0.42%, and the NAV as of 6 July 2023 stands at ₹51.79.
PGIM India midcap opportunities fund
Launched by PGIM India Mutual Fund in 2013, the PGIM India Mid Cap Fund is designed for long-term capital appreciation. This average-risk scheme primarily invests in equity and equity-related instruments of mid-cap companies. As of 6 July 2023, the scheme's expense ratio is 0.42%, and the NAV stands at ₹53.1.
Axis small cap fund
Axis Mutual Fund introduced the Axis small cap fund direct growth plan in 2013. This scheme focuses on Investing in a diversified portfolio predominantly consisting of equity and equity related instruments of small cap companies. The scheme's portfolio carries a high level of risk, with an expense ratio of 0.55% and an NAV of ₹82.03 as of 6 July 2023.
Mirae asset emerging bluechip
This large-mid cap fund was Launched by Mirae Asset Mutual Fund in 2013, the Mirae asset emerging bluechip fund focuses on income generation and long-term capital appreciation by investing 35-65% in top 100 large cap companies by market cap & 35-65% in top 250 mid cap companies by market cap. The expense ratio for this scheme is 0.67%, and the NAV as of 6 July 2023 stands at ₹116.56.
Can a minimum investment of ₹1,000 in SIP generate profits?
Consistency in investment is key to realising the potential returns of a ₹1,000 SIP. By consistently contributing to your SIP, your investment will be compounded and accumulated over the tenure. This approach allows your investment to benefit from the power of compounding, potentially leading to significant growth over time.
Taxation on SIP investments
It is crucial to understand the taxation rules associated with SIP investments. Depending on the duration of your investment, different tax implications come into play.
Long-term capital gains tax
If your investment has exceeded 12 months, any returns generated will be considered long-term capital gains. There are two scenarios to consider: if your investment gains exceed ₹1 lakh, you will be taxed at a rate of 10%. However, if your gains are below ₹1 lakh, they will be tax-free. In the case of debt funds, the gains are taxed similarly to Fixed Deposits (FDs).
Short-term capital gains tax
Investments held for less than 12 months fall under short-term capital gains (STCG). The tax rate on short-term capital gains is 15% for equity funds.
Conclusion
Mutual fund investments starting at ₹1000 through SIPs offer a convenient and affordable way to participate in the financial markets. By considering the above mentioned factors and exploring the recommended mutual funds, you can make well-informed investment decisions that align with your goals and risk tolerance. Remember to remain consistent in your investments and stay informed about any tax implications. Happy investing!
Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.