You should start investing Rs 500 every month in the share market and gradually increase the investment amount. Over time, it can grow into a significant sum.
You should start with a monthly Rs 500 for the first six months. After that, you should increase the amount to Rs 1000 every month.
Try to double the amount of Rs 2000 every month from the next year onwards. By doing this, you would be invested a total of
| Amount | Months | Total |
| Rs. 500 | 6 | Rs. 3000 |
| Rs. 1000 | 6 | Rs. 6000 |
| Rs. 2000 | 12 | Rs. 24000 |
| Total | Rs. 33000 |
You can have a portfolio of about Rs 40000 (33000 + 2-year return) by the end of 2 years.
You should start investing with this mindset otherwise there wouldn’t be any motivation to learn about the stock market.
You can start investing in the stock market with Rs 500 in different ways such as mutual funds, direct equity investment, and exchange-traded funds (ETFs). Each investment method has returns, pros, and cons. You should choose the one that aligns with your investment goals, interest area, and risk appetite.
| Investment Option | Potential Annual Return |
| Stocks | 18-20% |
| Mutual Funds | 12-15% |
| ETFs | 10-12% |
Let’s discuss each option in detail.
Direct Equity Investment
Direct equity means investing in individual stocks or shares of a company. In other words, you are buying a part of the company and becoming a shareholder. This type of investment is more complex than mutual funds and requires more knowledge and research.
Direct equity investment has the potential to provide high returns compared to other investment options. When you invest in individual stocks, you have complete control over your investment decisions.
On the downside, investing in individual stocks comes with high risk, as the stock prices can be volatile and unpredictable.
Tips for Investing Wisely in Direct Equity
- Do your research and analyze the company’s financial performance before investing.
- Look for companies with a good track record of earnings growth.
- Look for companies with a strong competitive advantage.
- Invest in companies with good management.
- Stay updated with the news and events that can impact stock prices.
- Have a long-term investment horizon.
Go through our detailed article on “How to invest in the share market in India” for a further understanding of the process.
Mutual Funds
Mutual funds are a pool of money collected from multiple investors and invested in a diversified portfolio of stocks or bonds. The fund manager manages the fund and decides which stocks or bonds to invest in, making it a passive investment option.
Mutual funds invest in a diversified portfolio of stocks or bonds, which helps reduce the risk of investing in a single stock. Additionally, professional fund managers manage mutual funds, which makes it easier for investors to get exposure to the stock market without doing extensive research on individual stocks.
You can start SIP in mutual funds with Rs 500, where you can invest a fixed amount of money monthly basis.
Process of Investing in Mutual Funds
- Choose a mutual fund that aligns with your investment goals and risk appetite.
- Open a mutual fund account with a fund house or a broker.
- Complete the KYC (Know Your Customer) process.
- Select the mutual fund and invest the amount you want to invest.
Tips for Investing in Mutual Funds
- Invest in mutual funds with a track record of consistent returns.
- Choose a mutual fund that aligns with your investment goals and risk appetite.
- Keep an eye on the expense ratio of the mutual fund.
Read our list of best brokers for mutual funds investment to know about top brokers to cater to your mutual funds’ investment needs.
Exchange-Traded Funds
ETFs hold a basket of assets such as stocks, bonds, commodities, or currencies, and are designed to track the performance of a specific index or benchmark.
One of the advantages of ETFs is that they offer diversification. By holding a basket of assets, investors can reduce their exposure to the risks associated with investing in individual stocks or bonds.
ETFs are passively managed, they have lower management fees than actively managed mutual funds.
Broadly speaking, there are three types of ETFs:
- Index ETFs – These ETFs are designed to track a specific index, such as the S&P 500. They typically hold a basket of stocks that represent the index they are tracking.
- Sector ETFs – These ETFs focus on specific sectors, such as technology or healthcare. They hold a basket of stocks that represent the companies in that sector.
- Commodity ETFs – These ETFs invest in commodities such as gold, silver, or oil. They offer investors exposure to the commodity markets without having to buy physical commodities.
Process of Investing in ETFs
- Choose an ETF that aligns with your investment goals and risk appetite.
- Open a Demat account with a broker.
- Complete the KYC process.
- Purchase the ETF you want to invest in through your Demat account.
Tips for Investing in ETFs
- Choose an ETF that tracks a diversified portfolio of assets.
- Keep an eye on the expense ratio of the ETF.
- Invest in ETFs with a track record of consistent returns.
Our detailed guide on how the share market works may help you understand the basic functionality of the stock market.
FAQs
Q1. Can I start investing in the share market with just 500 rupees?
Yes, you can start investing in the share market with just 500 rupees. There are several investment options available, such as mutual funds and exchange-traded funds (ETFs), that allow you to invest small amounts of money.
Q2. What are the different ways to invest 500 rupees in the share market?
The different ways to invest 500 rupees in the share market include investing in mutual funds, direct equity, and ETFs.
Q3. How do I choose the right shares to invest in with 500 rupees?
When choosing shares to invest in with 500 rupees, it’s important to consider factors such as the company’s financial performance, market trends, and the overall economic climate.
Q4. What are the risks of investing 500 rupees in the share market?
The share market is subject to fluctuations, and as a result, investing in it involves risks. The value of your investment can go up or down based on market conditions.
Q5. What are the potential returns on a 500 rupee investment in the share market?
The amount of return you can earn depends on various factors such as the stock you choose, the market conditions, and the duration of your investment.
Q6. Can I invest in direct equity with just 500 rupees?
Yes, you can invest in direct equity with just 500 rupees. However, it’s important to note that investing in individual stocks involves higher risk than investing in mutual funds or ETFs.
Conclusion
Investing in the share market can be a great way to grow your wealth over time. You can begin to build a decent portfolio by starting small with Rs 500 and gradually increasing the investment.
I have discussed several methods for investing 500 rupees in the share market, including mutual funds, direct equity investment, and exchange-traded funds. Each method has its own pros and cons, and it’s important to choose the one that’s right for your individual financial situation.
