How to Invest in Mutual Funds:

How to Invest in Mutual Funds:

Mutual funds allow investors to reap inflation-beating returns with the help of a diversified portfolio of stocks and/or bonds. Mutual Funds allow investors to start investing with an amount as low as Rs. 500, along with the facility of professional management of funds. No wonder Mutual Funds have become one of the most popular investment instruments today.
Investing in Mutual funds involves one of the easiest investment processes making these investments flexible, transparent and reliable for the investors. One can invest in mutual funds in either of the following ways-

Online mode

Offline mode

Steps to Invest in Mutual Funds via Online Mode:

In order to invest in mutual funds using the digital mode, you must follow the given steps-
Step 1: Visit the website of any one of the following-
  • An Asset Management Company (fund house) (for both direct and regular mutual fund schemes)
  • A registered investment adviser (RIA) such as Paisabazaar (for direct mutual fund schemes)
  • A mutual fund distributor (for regular mutual fund schemes)
Step 2: Complete the e-KYC form available on the concerned authority’s website. You will be required to digitally submit the self-attested copies of the following documents along with the KYC form-
  • An identity proof (Aadhaar card, Passport, Voter ID, or Driving Licence)
  • PAN card
  • An address proof
  • A passport-sized photograph
Step 3: Complete the in-Person Verification (IPV) as mandated by capital market regulator, SEBI (Securities and Exchange Board of India). You can complete the IPV in 2 ways- either by visiting any of the following institutions and submitting the original copy of the above-mentioned documents:
  • KYC registration agency (KRA)
  • AMC
  • Mutual fund agent/distributor
  • Mutual fund registrar
  • Karvy/CAMS office
Or, by completing the IPV (in-person verification) via video conferencing using a webcam at a pre-agreed time with the concerned intermediary.

Step 4: Select a mutual fund scheme on the basis of your investment horizon, risk appetite, availability of funds and other important factors. 

Step 5: Submit the mutual fund application form. This can be done after the completion of the IPV which usually takes 5-7 days. Along with the application form, you must also submit the investment amount. If you wish to invest via SIP (Systematic Investment Plan), you must also fill and submit the SIP form along with the application.

Steps to Invest in Mutual Funds via Offline Mode:

Step 1: Visit to any one of the following institutions-
  • An Asset Managements Company (fund house) branch
  • A bank
  • A Karvy/CAMS office
  • A mutual fund agent/distributor
Step: 2: Submit KYC (Know Your Customer) form. Getting your KYC done is mandatory for all first-time mutual fund investors. You need to submit the self-attested copies of the following documents along with the  KYC form–
  • An identity proof (Aadhaar card, Passport, Voter ID, or Driving Licence)
  • PAN card
  • An address proof
  • A passport-sized photograph
Step 3: Complete the in-Person Verification (IPV) as mandated by capital markets regulator SEBI (Securities and Exchange Board of India). You can complete the IPV in 2 ways. You can either visit any of the following institutions and submit the original copy of the above-mentioned documents-
  • KYC registration agency (KRA)
  • AMC
  • Mutual fund agent/distributor
  • Mutual fund registrar
  • Karvy/CAMS office
Or, you can complete the IPV via video conferencing using a webcam at a pre-agreed time with the concerned intermediary.

Step 4: Select a mutual fund scheme on the basis of your investment time horizon, risk appetite, availability of funds and other important factors. 

Step 5: Submit the mutual fund application form. This should be done after the completion of the IPV which usually takes 5-7 days. Along with the application form, you should also submit the investment amount. If you wish to invest via SIP (Systematic Investment Plan), fill and submit the SIP form along with the application.

Steps to Invest in Mutual Funds via Mobile Application:

Mutual fund houses have introduced mobile applications for investors taking the ease of mutual fund investments to the next level. Each fund house has its own mobile application that can be used by investors to invest in the specific fund. Investing through mobile applications does not require any documents to begin the process of investing. However, getting your KYC done is a mandatory requirement.

The introduction of this paperless process of investing allows investors to choose the funds of their choice by going through the fund’s historical performance, NAV, AUM, etc. and invest according to their own investment horizon, risk appetite, and financial goals.
To invest through a mobile application, you must-
  • Begin with downloading the application via App Store/Play Store on your smartphone
  • Log in to the application by creating an account
  • Get your KYC done
  • Once you are done with the d logging in and registering yourself on the application, you can check the available funds and track their performance
  • After choosing the fund, you can start investing
Costs Associated with Investing in Mutual Funds:

The management of your funds makes you liable to pay certain expenses explained as below-
  • Expense Ratio- Expense ratio is a fee that an investor is charged for the professional management of his/her funds. It is calculated as the percentage of the assets payable to the fund manager. You can read more about how Expense Ratio of a fund can be calculated.
  • Entry Load– This fee is charged when you invest in a mutual fund scheme. Entry load was deducted from a fund’s NAV (Net Asset Value) and was generally fixed at around 2.25% of the investment value. Since 2009, SEBI has abolished the entry load on mutual fund investments.
  • Exit Load– Exit load is a fee charged when an investor leaves or redeems his investment in a mutual fund scheme. An investor is liable to pay exit load if he/she redeems his funds before a specified time period. Exit Load is charged in order to discourage the investors to withdraw their funds, thereby reducing the number of withdrawals from the scheme.
  • Indirect charges– Investors might have to incur a number of indirect expenses during the tenure of his/her investment. These expenses include costs related to maintaining the account, brokerage, Security Transaction Tax (tax that must be paid by the investor while buying and selling stocks), etc.



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