Earlier we discussed what is mutual fund and its benefits. In this article, we are going to discuss different ways by which you can buy mutual funds online in India. However, mutual fund investment may seem complicated for the first time investors as it can be confusing at times. Understanding how mutual funds work is the first step in your investment journey.
How do Mutual Funds work?
A mutual fund is formed when an asset management company (AMC) pools investments from various individual and institutional investors with common investment objectives. A fund manager professionally manages the pooled investment by strategically investing in capital assets to generate maximum returns for the investors. Fund managers are professionals in the field of finance with an excellent track record of managing investments and have an in-depth understanding of markets. The fund houses charge expense ratio, which is the annual maintenance fee to manage investments of individuals. The investors make money through regular dividends/interest and capital gains. They can either choose to reinvest the capital gains via a growth option or earn a steady income by way of a dividend option.
Why should you invest in Mutual Funds?
- Convenience – Investing in mutual funds is a paperless and straightforward process. Investors can monitor the market and make investments as per their requirements. Moreover, switching between funds and portfolio rebalancing helps to keep returns in line with expectations.
- Low initial investment – You can have a diversified mutual fund portfolio by investing as low as Rs 500 a month. You also have the option to invest either as a lump sum or a systematic investment plan (SIP). However, when compared to lump sum investments, a SIP is capable of lowering the overall cost of investment while unleashing the power of compounding.
- Tax-saving – Section 80C provides tax deductions on specific financial instruments, and mutual fund is one of them. Equity Linked Savings Scheme (ELSS) has become a popular tax-saving option for Indians in the last few years, owing to its higher returns and the shortest lock-in period of three years among all Section 80C options.
- Professional fund management – In mutual funds, your money is managed by a professional fund manager who is backed by a team of researchers. The fund manager formulates the investment strategy for your asset allocation. He/she will have real-time access to the financial environment and adjusts your mutual fund portfolio accordingly.
Direct vs. Regular Mutual Funds
Any mutual fund that you might be planning to invest offers two plans — either direct plan or regular plan.
Since Jan 2013, mutual funds have started offering direct plans for all their existing funds. The difference between a direct plan and a regular plan is that you can save a lot of money while choosing a direct plan investment route as there are no intermediates involved here.
In direct plans, You do not need to make your investment through distributors, and hence it can save you a lot of intermediate expenses. Therefore, you’ll be getting a higher return on your portfolio despite the same fund. The difference in returns from direct plans compared to regular plans can be as high as 1–1.5%. This can be a substantial amount if you’re planning to invest for a long time to build a considerable corpus.
Anyways, as investing in regular plans is comparatively more accessible, that’s why people go for it. Nonetheless, in the last few years, there has been a rise in a lot of trusted websites and mobile apps to make direct mutual fund investment fast and easy. Overall, you can select anyone — either direct or regular plan, depending on your preference. However, we’ll highly recommend you to choose the direct investment route while investing in mutual funds online in India.
What you need to get started with Mutual Fund investing?
To start investing in a fund scheme you need a PAN, bank account and be KYC (know your client) compliant. The bank account should be in the name of the investor with the Magnetic Ink Character Recognition (MICR) and Indian Financial System Code (IFSC) details. These details are mentioned on every cheque leaf and it is common for an agent or distributor to seek a cancelled bank cheque leaf.
Know Your Client (KYC)
As per the regulations by SEBI, you’ll need to complete your KYC before you invest in mutual funds in India. This is because KYC helps in verifying the buyers and eliminating the duplication across intermediaries. It also makes online investing easier and efficient.
But if you’ve not done your KYC, do not worry, thinking it will involve a lot of documentation and labor. In the era of fast internet, you do not need to move even an inch from your sofa to complete the KYC. All can be done online, and that too within minutes.
Now, if you have already invested in any fund earlier, either offline or online, your KYC might be already done. Therefore, you do not need to re-complete your KYC. Here, simply check your KYC status online.
For already registered users, they can check their KYC status online using their PAN card with any of the following KYC registration agency
- https://camskra.com/
- https://www.nsekra.com/
- https://www.cvlkra.com/kycpaninquiry.aspx
- https://www.karvykra.com/UPanSearchGlobalWithPanExempt.aspx
- https://kra.ndml.in/kra-web/jsps/pos/KYCClientInquiry_NEW.jsp
How to get your KYC?
KYC process is investor friendly and is uniform across various SEBI regulated intermediaries in the securities market such as Mutual Funds, Portfolio Managers, Depository Participants, Stock Brokers, Venture Capital Funds, Collective Investment Schemes and others. This way, a single KYC eliminates duplication of the KYC process across these intermediaries and makes investing more investor friendly.
Documents required to be submitted along with KYC application
- Recent passport size photograph
- Proof of identity such as a copy of PAN card or UID (Aadhaar) or passport or voter ID or driving licence
- Proof of address passport or driving license or ration card or registered lease/sale agreement of residence or latest bank A/C statement or passbook or latest telephone bill (only landline) or latest electricity bill or latest gas bill, which are not older than three months.
You will need to submit copies of all these documents by self-attesting them along with originals for verification.
Now, almost all mutual fund distributors and broker websites provide a link to complete your Know-Your-Client (KYC) online. You can visit the AMC website, upload your documents, and complete your KYC.
For example, if you are interested in investing in SBI mutual funds, you can visit their website. On their website, you can find the link to complete the KYC verification process.
Else, if you are planning to invest through any popular mutual fund apps, you can upload your documents inside the app, and they will help you get your KYC verification done.
How to buy mutual funds online in India?
Now that you have understood the basics of regular vs. direct funds, e-KYC, etc., let’s dive into the main topic of this article — how to buy mutual funds online in India.
Here are a few ways how you can invest online in mutual funds:
1) AMC Website
The fastest way to buy mutual funds is through AMC websites as you’ll buying directly from the AMC and eliminating all the intermediaries. Mutual funds are managed by the AMC’s, i.e., Asset Management Companies. You can buy all the funds offered by these fund houses from their websites.
Now, to buy a mutual fund from the AMC website, first, visit the site and download the application form. Here, you’ve to fill your details and submit along with the photocopy of PAN, KYC letter and initial cheque.
The first time when you invest in any mutual fund through AMC, you’ve to go to the AMC’s office to submit documents and make your investment. Anyways, once it is done, you can make all your future investments online. You will be assigned the PIN and folio number. Hence, you can perform the subsequent transactions ‘online’ using your net banking. Also, a lot of these AMC’s may send their Agents to your house/address to collect the application form, cheque, and other docs, which can save your time.
Anyways, if you are planning to invest in various funds offered by different AMCs, you have to perform the same procedure for all the mutual fund companies. However, this may not be very convenient.
For example, if you are planning to invest in five mutual funds, you have to visit their AMC websites one-by-one to register. Although the KYC verification procedure will not be repeated, still tracking and monitoring all the funds will also be a little difficult if you have invested through multiple AMC websites.
2) Broker Platforms
If you have already opened a demat account with any of the big brokers in India, you can buy mutual funds online using your brokerage account. Most of the major brokers in India, like ICICI direct, HDFC securities, Kotak securities, Zerodha, etc. have the facility to buy mutual funds from their portal.
Now, buying funds using broker platforms is a simple way to purchase mutual funds online in India. All you need to do is to log in to your account, select the scheme you want to invest, and complete the payment. The mutual fund units will be credited directly to your existing demat account.
3) Independent Websites/Apps
You can also buy mutual funds online in India through independent websites or apps. A lot of Indian websites like Funds India, Groww, etc. provides the facility to their clients to invest directly in mutual funds at no commission. Know More about this apps.
Bottomline
A majority of people do not invest in mutual funds because they’re afraid of documentation work and believe that investing in mutual funds requires a lot of work. However, as discussed in this article, there are multiple ways through which you can invest in mutual funds online in India.
If we conclude the article, investing in mutual funds through the AMC website will be cheaper and includes no extra cost. However, the biggest concern with this approach to remember all the PINs and passwords at different AMC websites.
On the other hand, investing in mutual funds online in India through the independent websites/apps offers the clients a ‘single login portal’ for the consolidated view of the holdings.
Finally, purchasing mutual funds from the brokers through a demat account is a more relaxed approach compared to the above two. Here, the customers can also get added benefits like access to the research reports to make a better decision. However, they have to pay extra costs like demat account maintenance charges. Besides, not all mutual funds are available/partnered on the broker website. Therefore, for purchasing some funds, you have to visit the AMC website.
If you’re a beginner, we’ll recommend buying mutual funds online in India using independent apps like Groww, myCams, etc. And once you’re comfortable with the buying process, choose the route of investing through AMC websites.