How to Invest in Mutual Funds With a Small Budget

What Are Mutual Funds?

Mutual funds are an investment where money is pooled from many investors to invest in a diversified portfolio of stocks, bonds and other securities. When you invest in mutual funds, you don’t get stocks, instead, you get mutual fund units.

These units represent part-ownership of the underlying assets held in the mutual fund’s portfolio. The value of these units is presented by NAV (Net Asset Value). The NAV of mutual fund units fluctuates daily as per the market performance of the fund’s investments. There are different types of mutual funds you can choose to invest in based on your risk appetite and financial goals.

Mutual fund investments are passive investments where fund managers handle the investor’s fund and decide where to invest for maximum capital appreciation. Your mutual fund investments are reinvested, significantly boosting your investment value over the long term.

Can You Invest in Mutual Funds With a Small Budget?

Investors can invest in mutual funds in two ways: Systematic Investment Plan (SIP) and a Lump sum.

Since you have a limited budget for investing in mutual funds, opt for SIP as it will allow you to start investing with an amount as low as ₹500. This eliminates the need for large initial capital investment. As your income and budget increase, you can boost your SIP amount to boost your returns.

How to start investing in a mutual fund on a small budget?

You can invest in mutual funds on a small budget through two avenues: AMC’s website or the Upstox App.

Investing in Mutual Funds Through AMC’s Website

Step 1. Select the Asset Management Company (AMC) you wish to invest in.

Step 2. Visit the selected AMC’s website and create an account.

Step 3. Complete the KYC process by submitting the required documents.

Step 4. Based on your financial goal, select the type of scheme(s) you want to invest in and choose a method of payment. Opt for SIP since you’re investing on a small budget.

Step 5. Complete your payment and receive the mutual fund units in your demat account.

Investing Through Upstox

Step 1. Create an account with Upstox using the app or through Upstox’s website.

Step 2. Once all verification is done, your Upstox account will be created. Open the Upstox app and go to ‘Upstox for Investors’.

Step 3. On the homepage, click on “Invest in Mutual Funds”. You will see different fund types: Equity, Fixed Income and Hybrid.

Step 4. Select the type of mutual fund you want to invest in. Let’s say you picked ‘Equity’ funds, you will see different types of equity funds offered by various AMCs, such as Index Fund, Liquid Fund, Overnight Fund, ELSS, etc.

Step 5. Select the fund you want to invest in, and all fund-related information will appear on your screen. Choose the SIP payment method.

Step 6. Pick the SIP amount. You also have the option of setting auto-increase SIP to boost returns.

Step 7. Click on ‘Continue’ and tap on ‘Confirm to Buy’.