Mutual funds are the most lucrative forms of investment for defensive investors. They come for every type of financial goal and at the same time are convenient to invest in. Mutual Funds offer returns in line with what a goal might need and better flexibility than any simple fixed deposit or savings scheme.
Buying a mutual fund online is the easiest way to get started with an MF. Instead of going for a lump sum, you could also go for a monthly instalment based investment called SIP (Systematic Investment Plan).
But today, we are going to walk you through how to buy mutual funds online. We shall also explore the tips and tricks involved in choosing the best mutual fund provider. You don’t need a demat account for mutual funds. But first, let us look at the different ways you can start with Mutual Funds.
Investing in mutual funds is easy. Today, we are going to give you the procedure to invest in mutual funds online
1. Find an online broker that is perfect for you
Even though we have more options available online, we can end up with the wrong choice, which leads to avoidable losses. Selecting an appropriate broker is as important as selecting a stock.
Basically, Brokers are classified into Full-time Brokers and Discount Brokers
Full-time brokers are those who provide full service and can give custom-made investment guidance and recommendations apart from the brokerage. However, charges for their service are not so cost-effective and sometimes expensive.
On the other hand, discount brokers give advice on a particular trade by charging a nominal fee, leaving the ultimate decision on investors.
However, today online discount brokers are in huge demand, especially for newcomers, who have a limited budget and cannot afford the charges of full-time brokers. Even these brokers have an enormous range of tools for shareholders of all experience levels.
Always look for the following factors while selecting a broker:
- Reviews of the broker that can be checked online from existing customers.
- Make sure that the broker is updated with all the information related to the financial bulletin and has tools for the same.
- Is the broker capable of providing the effective and necessary information and how reliable was this information in the past?
- Does the brokerage put forward more tools so that the investors make better choices?
2. Know about the schemes available
Currently, there are over 5000+ regular and direct mutual funds online. Out of all the different types of mutual funds, you can choose the scheme that best suits your requirements. Ensure proper base work is done before investing in any scheme.
Most importantly, line up the factors like investment goal, the amount for investment and the risk factor to see what suits you the best.
Points to remember:
- Thoroughly check for scheme information document
- Find out the different types of funds like equity, hybrid, debt, etc.
- Identify the fund house
- Select the fund that has a consistent track record of good performance.
- One can also take the help of a financial advisor on schemes available and then opt for an investment so that you can get the best rate of growth based on your goals and needs.
3. Consider the risk factors involved
Investment means risk and mutual funds come with risk (though considerably less than direct equity in case you are opting for equity mutual funds ). Risk can vary depending on the asset class the fund invests in.
Equity schemes are best for those who wish to achieve long term financial goals which are years away. On the contrary, debt schemes are for those investors who want to save for short term goals or to simply park excess savings or windfalls.
Post identifying the investment objective, discovering various schemes and filling the KYC (Know Your Customer) requirements, a bank account is a prerequisite before investing in mutual funds. The investor needs to submit a cancelled cheque bearing the IFSC (Indian Financial System Code) and MICR (Magnetic ink character recognition) codes of the bank to the respective fund house.
How to open a mutual fund account online?
Now that you have understood all the factors you need to find the fund that’s perfect for you. Let us see how to invest online in a mutual fund. You can open a mutual fund account online through the following ways.
1. Online through the official website
Investing in mutual funds online is stress-free, rapid, and effortless and hence, favoured by most investors. Many fund houses offer online facilities these days, all you need to do is to follow the instructions provided in the official site of the respective fund house.
Investors can get a Demat account online by signing-up and submitting the eKYC. An investor can complete the KYC process online by entering the Aadhar number and PAN number. After a backend verification, one can start investing.
Apart from processing your fund requests, a lot of these fund houses also provide you with the financial education and the necessary guidance on how to invest and which funds to invest in.
For instance, at Scripbox, your investment guidance is personally tailored to suit investor goals. Goals could range from savings to wealth creation and even, tax saving.
All you need to do is sign up, pick your goals, explore the plans that align with your goals and start investing.
2. Through an app
Mobile apps have revolutionised the way people invest in mutual funds online. A lot of fund houses have their own mobile applications that can streamline the investment process easily.
These apps will help you invest in mutual fund schemes, buy and sell securities, view account summary, keep a track of other details regarding the portfolio and much more.
3. Through the AMC website:
For opening an account, one has to follow the registration process with the AMC website. The process involves the following:
- Visit the respective fund house website
- Check for “invest online” option
- Download the application form
- Fill the details (both personal and investment)
- Attest the cheque (the amount the investor want to invest)
- Download the KYC form
- Attest the identity proof, address proof, and PAN details with passport-sized photographs
- Send all the appropriate documents to the address provided on the form
- After reviewing the application, you will get a receipt that enables you to make transactions online.
- PIN (personal identification number) is allotted to do the transaction
Note: One has to attest the KYC document to their AMC application to proceed further
Open a Demat account with large brokers
NSE and BSE are the bodies with which the brokers are linked. One Demat account is enough to transact for mutual funds or other securities and it can be opened with the help of any broker by paying the account opening charges.
In order to get an account, one must;
- Pay annual maintenance charges
- An application form needs to be filled with the cheque (i.e account opening fees) attached, PAN card copy, and KYC form and submit it with the respective broker
- Login id and password will be sent by the fund house and for online transaction, the broker will send the online id and password.
- One can opt for either SIP(Systematic investment plan) or any other scheme for which the investor has to pay transaction fees accordingly.
How to do KYC for mutual fund online?
KYC (Know Your Customer) is very important for banks, brokers and other financial institutions to help the government to take action against money laundering or fraudulent activity. The investor should always stick to KYC guidelines, before making any investment. In order to do online KYC for mutual funds, you need to submit the following proofs
- Permanent Account Number (PAN) card,
- Proof of Residence,
- Age proof, etc .as listed by the fund house.
- In addition, if the fund allows eKYC, (i.e. filling KYC requirements through online). The investors then have to visit the website of the respective fund house and follow the procedure using the link provided in the site.
How to buy mutual funds online without Demat account
Normally, you need to have a Demat account for mutual funds. But, did you know that you could buy a mutual fund even without a Demat account?
Let us now look at how to invest in mutual funds without Demat account
Dematerialize account means holding financial securities in an electronic form where all the holding can be seen collectively. Therefore, you can keep track of your securities.
These accounts are maintained by two central depositories namely: CDSL (central depository services Ltd) and NDCL (National security services Ltd). These entities function through DPs (depository participants) that can be either a broker or a bank.
However, it is not necessary for mutual funds to hold the Demat account as Investment in MFs can be done through the following ways.
1. Brokers on the stock exchange: Registered brokers or advisers of AMFI(Association of mutual funds of India) are the best sources to buy mutual funds from, as these brokers are active with all the schemes and market trends. Just select the adviser who is more active, have a thorough knowledge of trends and schemes, and can help you buy the best.
2. Fund house’s website: Mutual fund companies recommend the product on their websites which does not require a Demat account. The transaction takes place through the company’s website using the PIN number and the portfolio number allotted by the respective company.
3. Independent portals: There are so many portals available in the market that offers a list of mutual funds. We just need to register online and open an online account. These portals also provide an online platform to keep track of all the investments.
How to switch mutual funds online?
Mutual funds come with an option to switch your investment from one mutual fund to another after a clear review of your investment goals. You could change only some of the allocations but not all of it. There are two ways of doing this.
- Log in to mutual fund account
- To do any transaction, go to the transaction page
- Click on the fund’s name and you will find a switch option. Click on it.
- Click the “direct plan” option and follow the steps
- To reflect the change minimum four days are required
- Go to the nearest branch of the fund house and fill and submit the switch form
- Enter your portfolio number and fund name
- After the procedure, you will get the updated account summary
- It can be done through the arbitrator as well
Here was a detailed guide on How to buy mutual funds online in India. While Mutual Funds are simple yet effective in terms of investments, they could also turn out to be a sour experience if not done right. Also, please do not forget that Mutual Funds are taxable investments.
If you have any further questions regarding mutual funds or any other investment options, feel free to write to us in the comments section below and our team will get back to you at the earliest.