How Much Money Do You Need to Start Investing?

By Editorial Staff | November 02, 2018 – 12:07 AM IST


Start investing

There are lots of aspiring investors who want to invest in the stock market, but they do not know precisely how much money do they need to start investing?

The simple answer to this question is open a Demat and trading account, pay the account opening fees and invest an amount you are comfortable with. A good starting amount can be as low as ₹ 5000.

Investing is not a one-time decision it is a continuous process. Developing a habit of regular saving is more important so you can increase your investment with time and reach the financial goal you want to achieve.

The initial amount required to start investing may vary with the asset class you want to invest. Stocks, mutual funds, and ULIPs are the most commonly used investment vehicles by investors in India.

In this article, we will discuss the amount you need to start investing in stocks, mutual funds, and ULIPs.

Investing in stocks

If you are planning to invest directly in stocks, you need to open a Demat and a trading account which may cost you account opening charges anywhere between Rs. 200 to 1000 as depends on the broker of your choice.

The account opening charges are different for different brokers.

Other than account opening charges you also need to pay annual maintenance charges for Demat and trading account.

The broker charges a small amount as brokerage fee for every trade you make in the market.

Price of stocks

After opening a Demat and trading account, you need to buy shares of the company you want to invest in. To purchase the shares of your choice you have to pay the market price of that stock.

The market price of stocks can vary significantly. For example, the cost of a penny stocks might be in the range of less than ₹ 1 to ₹ 50 (however there is no hard and fast rule for what stocks you can call a penny stock, it is up to your choice)

Some other stocks may cost you several thousand rupees for a single share. For more clarification, let us see the closing price of some expensive stocks on the National Stock Exchange (NSE) as of 31 October 2018:

MRF Ltd. – ₹ 64498.55
Eicher Motors Ltd. – ₹ 21864.60
Bosch Ltd. – ₹ 19746.50
Page Industries Ltd. – ₹ 29453.60
Shree Cements Ltd. – ₹ 13917.35
3M India Ltd. – ₹ 19842.75
Tide Water Oil Ltd. – ₹ 5611.75

If you are planning to invest in the stock of these companies, you have to start with a decent amount. Price of shares fluctuates in a day to day trading.

Also, when companies realize the price of their shares is too high to attract enough buyers they split their shares to lower down the cost of stocks.

Investing in Mutual Funds:

For beginner investors who lack investing knowledge, experience and time to make their investment decision themselves, mutual funds are the best choice.

Mutual funds are managed by the professional fund managers who can make better investment decisions in comparison to a newbie investor.

Mutual funds give access to a diversified portfolio in much lower cost than the actual securities of that portfolio.

You can buy fund units by paying as low as Rs. 500 on a monthly basis as a SIP. Several top-rated Mutual funds provide SIP starting from Rs. 500 monthly.

Some others mutual funds provide a monthly SIP as low as Rs. 100

There are so many mutual funds available in the market who invest in different asset classes. Some mutual funds invest in high-risk securities to make a high return some others invest in low risk or fixed income securities.

Investors can choose the mutual fund as per their risk tolerance and future goals.

Investing in ULIPs:

ULIPs or Unit Linked Insurance Plans are the product which combines the benefits of insurance and investing in the same plan. The premium paid by investor every month is divided into two part one part is paid as an insurance premium, and the other part is invested in different investment vehicles.

The popularity of ULIP is increasing because of the dual benefits of ULIP.

Investors can buy a good ULIP plan by paying a monthly premium of about Rs. 1500 – 2000

There are so many ULIP plans available in the market, and investors can choose according to their need. ULIPs invest money in different equity and debt funds. Investors can buy ULIP plan as their needs and risk appetite.

Start investing with a small amount first:

It is advisable to start investing with a small amount in initial days of investing and gain some experience before investing a significant amount in the market.

Every investor starts as a newbie at some point, but proficiency comes with spending time in the market and making yourself more knowledgeable about the market.

Starting with a small amount will safeguard you against your poor investing decisions as a beginner investor. In the share market, it is a normal thing to make bad decisions and learn from it. Even the most successful investors make bad decisions sometimes, but they never stop learning from it.