Investing in Mutual Funds with Just 10 Rupees: A Guide
Most mutual funds in India require a minimum investment of 500 to 1000 rupees. However, new mutual fund companies like Navi Mutual Fund have made it possible for investors to start with as little as 10 rupees. This article aims to guide you through the process of investing in mutual funds with such a small amount, including tips on minimum investment, understanding market risks, and the power of compounding.
Opening a Demat Account and Understanding Mutual Funds
To start investing in mutual funds with just 10 rupees, the first step is to open a Demat (Dematerialized) account with a broker. A Demat account is a digital repository that holds your investment in the form of dematerialized securities. Once you have your Demat account, you can start your investment journey by gaining some knowledge about mutual funds. This includes understanding the different types of mutual funds, their risks, and returns, as well as the strategies to follow when investing.
It is important to note that all investments, including mutual funds, are subject to market risk. Therefore, before making any investment, you should take the time to read all the terms and conditions. This will help you understand the risks involved and make informed decisions.
Real-Life Examples and the Power of Compounding
Historical data suggests that a small investment like 10 rupees has the potential to grow significantly over time. For example, an investment of Rs. 10,000 in a blue-chip company like TCS in 2001 would have grown to about three times the original investment due to its performance during the IT slump. Similarly, one investor who invested a small amount around 2000 has seen his original investment grow to provide him with dividends at least twice per year.
The power of compounding can be underestimated. No matter the initial amount, whether it is 10 rupees or Rs. 1,00,000, the key is to be disciplined, dedicated, and patient. Research and due diligence are crucial before committing your money. This research will provide you with the confidence you need when the market is declining, and it is your time to purchase. I have made more money on my investments made during recessions than during stable market conditions. Many investors follow the herd mentality, but for investing, this is a foolhardy strategy.
While investing, it is essential to be contrarian. The strategy of waiting for others to take risks after reading numerous reviews may work for consumer goods, but it is not a sound approach for investing. In fact, entering the market during rough waters can lead to better returns. If you are satisfied with fixed deposit (FD) returns, sticking to it is fine, but to earn better returns, you need to be willing to take some risks.
Final Thoughts
In conclusion, investing in mutual funds can be a viable option, even with a small initial investment of 10 rupees. By opening a Demat account, gaining knowledge about mutual funds, and being patient and disciplined, you can achieve your investment goals. Always remember that market risks are involved, and thorough research is essential. The return on investment depends on your ability to stay patient and make informed decisions.