Best Mutual Funds to Invest with ₹500

Starting small in the Indian stock market can pave the way for building wealth, especially if you’re new to investing. If you’ve been searching for options like a mutual fund with a 500 rs investment, an SIP at 500 per month, or simply a 500 rs per month investment, you’re in the right place. With mutual funds, you can begin investing with just ₹500, making them a great choice for anyone. Let’s dive into the top mutual funds for a ₹500 investment, explore why they’re worth considering, highlight key factors to think about, and show you how to calculate your returns as of May 2025.

Why Choose Mutual Funds?

For Indian stock market traders, mutual funds stand out because they bring diversification, expert management, and low costs to the table. By starting an SIP with a mutual fund minimum investment of 500, you can invest regularly without needing a big upfront sum.
Here’s what makes mutual funds a smart pick:

• Affordable Start: Many funds let you begin with just ₹500 monthly, ideal for those starting out.
• Spread-Out Risk: Your money gets invested across different stocks or bonds, lowering the risk.
• Expert Handling: Fund managers take care of your investments, so you don’t have to stress over decisions.
• Growth Over Time: An SIP of 500 per month for 5 years can grow a lot thanks to compounding.
• Adjustable Plans: You can raise your SIP amount as you earn more or take a break if needed.

For investors in India, mutual funds offer a steady path to grow wealth, even with small sums like a 500 rs investment in mutual funds.

Drawing from general knowledge and available data on mutual funds in India, here’s a list of top mutual funds suitable for a 500 rs mutual fund investment. These focus on the defense sector, which has shown strong growth and stability in 2025.

Fund Details:

SBI PSU Direct Plan Growth: This fund puts money into Public Sector Undertakings (PSUs) in India, focusing on companies owned by the government. It’s a good fit for those wanting high growth in the PSU space, which often gains from government policies and infrastructure projects.

Invesco India PSU Equity Fund Direct Growth: This fund also targets PSUs, focusing on sectors like energy, banking, and infrastructure. It suits investors optimistic about PSU stocks and government-led initiatives.

Motilal Oswal Midcap Fund Direct Growth: Investing in mid-sized companies with big growth potential, this fund is for those okay with moderate to high risk for better returns.

Franklin Build India Direct Fund Growth: This fund focuses on infrastructure sectors like construction, energy, and logistics, making it a solid choice for long-term growth tied to India’s infrastructure boom.

Franklin India Opportunities Direct Fund Growth: Targeting high-growth sectors like tech, consumption, and emerging industries, this fund is great for those wanting exposure to innovative areas.

Nippon India Small Cap Fund: A small-cap fund focusing on smaller companies with high growth potential, it’s best for investors willing to take bigger risks for higher long-term gains.

DSP Flexi Cap Fund: This fund spreads investments across large, mid, and small-cap stocks, offering balance and diversification for those seeking steady growth with moderate risk.

Key Factors to Think About Before Investing ₹500

When starting a 500 rs mutual fund, keep these points in mind to ensure it matches your goals:

Your Goal: Decide if you’re saving for a short-term need (3-5 years) or a long-term plan like retirement. An SIP of 500 per month for 5 years works well for medium-term goals.

Risk Comfort: Defense sector funds can be up and down. Make sure you’re okay with market swings.

Fund Costs: Look for funds with low expense ratios (around 1%) so more of your money goes toward growing.

Track Record: Past returns don’t guarantee the future, but they can show how steady a fund has been.

Fund Manager’s Skill: A good manager can make a big difference, especially in focused funds like defense.

Withdrawal Fees: Some funds charge an exit load if you pull out early. Pick funds with low or no fees for more flexibility.

By weighing these factors, you can find the best mutual fund for 500 per month that fits your financial path.

How to Figure Out Your Mutual Fund Returns

Working out the returns on a 500 rs per month investment is simple with the SIP return formula. Let’s use the Nippon India Small Cap Fund as an example, assuming you invest ₹500 monthly for 3 years with an expected annual return of 28%.

Total Amount Invested: ₹500 × 36 months (3 years) = ₹18,000.

Expected Annual Return: 28% per year (or 28% ÷ 12 = 2.333% monthly = 0.02333).

SIP Return Formula: Future Value = P × {[(1 + r)^n - 1] / r} × (1 + r)

• P = Monthly investment (₹500)
• r = Monthly return (0.02333)
• n = Number of months (36)

Calculation:

First, find (1 + 0.02333)^36:
(1.02333)^36 ≈ 2.295 (using approximation for simplicity).
Then, subtract 1:
2.295 - 1 = 1.295
Divide by r:
1.295 ÷ 0.02333 ≈ 55.55
Multiply by (1 + r):
55.55 × 1.02333 ≈ 56.84
Finally, multiply by P:
500 × 56.84 ≈ ₹28,420

Outcome:
After 3 years, your ₹18,000 investment (₹500 monthly) at a 28% annual return could grow to around ₹28,420, earning you a profit of about ₹10,420.

Conclusion

Putting ₹500 into mutual funds is a practical way for Indian stock market traders to kickstart their wealth-building journey. Whether you’re eyeing an SIP of 500 per month for 5 years or just a mutual fund minimum investment of 500, the funds listed above are excellent starting points. By looking at factors like your risk comfort, fund costs, and financial goals, you can make smart choices. The calculation shows how compounding can turn small investments into big gains over time. Begin your 500 rs per month investment now and see your money grow!