How to invest in Mutual Fund?

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Mutual funds can be a powerful vehicle for financial freedom. There are many websites, blogs and magazines devoted to it. But do you know about the various mediums through which you can invest in Mutual Funds?

There are mainly 6 channels

  1. your demat account
  2. through advisors/banks etc.
  3. Online through respective mutual fund sites
  4. Registrar of Mutual Funds – Directly through CAMS/Karvy
  5. Direct / physical delivery to mutual fund offices
  6. Dedicated websites that offer various mutual fund schemes

We take a detailed look at the advantages and disadvantages along with the process of investing through each channel

demat account

Demat account only matters for people investing directly in the stock markets and hence not everyone will have it.

advantage:

  • You can buy/redeem MFs at the click of a few buttons from the comfort of your home.
  • You have a consolidated portfolio in one place. So it becomes easy to manage.
  • No tedious process of filling forms or giving documents every time you buy MF.
  • Invest immediately. Suppose the market suddenly falls at 2:30 PM then you can invest before 3:00 PM to get the NAV of the same day and hence buy at a lower price.

Harm:

  • This is the costliest channel. Even eliminating entry load demat accounts like Reliance Money still charge 2.25% for buying mutual funds.
  • Not all schemes are offered by all demat accounts.

through advisors/banks etc.

You have a financial advisor for you and you can buy directly from him. You just need to call him and he will collect the form and required documents from you.

advantage:

  • Easy investment process.
  • Good channel for those who are not net savvy.
  • If you have a good financial planner then they suggest you good schemes.

Harm:

  • Fee based system: You need to pay an annual fee/appointment fee or commission based fee to your advisor.
  • The advice may not be in your best interest and he may recommend you funds where he gets higher commission. (unfortunately that’s what happens most of the time)

Online through respective mutual fund sites

This is a very cool channel and I personally like it. But the problem is that very few mutual funds offer this facility. But then you can always find good plans among them.

The process of investing online through MF sites is more or less the same for all MFs.

  1. You can either download the form from their sites to fill online (if they have the facility).
  2. Fill the form and attach your attested copy of PAN card, bank check photocopy along with payment cheque.
  3. Fill out the PIN Agreement Form available on their website. This is necessary as you will need a PIN number to login to your MF account.
  4. Courier these filled forms and documents to the respective MF address, or submit it physically to your Registrar – CAMS/KArvy.
  5. In about 2 weeks you will get the pin number and you are all set to invest online.

advantage:

  • Here you get full advantage of demat account.
  • No commission/fees or hidden costs.

Harm:

  • The first investment should be in physical form. Hence you need to start investing through your advisor and/or other physical channels.
  • All mutual funds have different websites and different pin numbers. So if you invest in a large number of schemes, it would be difficult to track them. Plus you have to remember multiple folio numbers and passwords.

List of Fund Houses Offering Direct Online Investment

  • HDFC
  • Reliance
  • principal
  • Birla Sunlife
  • ICICI Prudential
  • IDFC
  • Bye
  • Quantity
  • Morgan Stanley
  • Kotak
  • Franklin Templeton
  • UTI
  • devotion to truth
  • Bharti AXA
  • Mirae Asset
  • State Bank Of India
  • Sundaram BNP

Registrar of Mutual Funds – Directly through CAMS/Karvy

Here you need to download the form from the respective MF site and fill it. Attach the photocopy of your PAN card and submit it physically to the CAMS/Karvy office in your city. The Registrar will authenticate your PAN card. So if you are submitting an unattested PAN photocopy, keep the original PAN card with you.

advantage:

  • This is a direct channel so there is no commission.

Harm:

  • You will need to physically visit the office to make the deposit. Hence not viable for all especially in small towns. Every time you make an investment, you have to fill out a lengthy investment form. But if you invest in a fund that offers online investment facility, then you can invest online later.

For complete list of Karvy/CAM office and where you can submit your forms for various mutual funds, visit: http://www.moneycontrol.com/easymf/order_forms/invest_easy.php

Direct / physical delivery to mutual fund offices

You have to follow the same process as in case of submission to CAMS/Karvy. But if you post it you will not be sure on which day NAV will be applicable on your purchase. The NAV applicable to your investment is the day the MF office receives your form and documents.

advantage:

  • This is a direct channel so there is no commission.

Harm:

  • Every time you make an investment, you have to fill out a lengthy investment form.
  • Shipping may take up to 2 days so purchase price is uncertain.

Dedicated websites that offer various mutual fund schemes at one place

There are two websites offering this service:

  • Fundsindia.com
  • Fundsupermart.co.in

It is the newest of all channels in India and by far the most convenient. I only know of these two sites that provide this service

You can choose one by looking at their mutual fund scheme coverage and other additional services as per your wish. The account opening process for both of them is quite similar.

  1. You have to fill an online form.
  2. After this the filled form is emailed to you
  3. Download the form from your email, take a print out and sign at the relevant places
  4. Attach a photograph along with PAN card, photocopy of bank cheque, address proof and KYC form and courier it to the given address.

advantage:

  • You get the benefits of investing online just like a Demat account but without paying anything.
  • Other value added services are also available free of cost

Harm:

  • The cutoff timings here are around 2:00 (at FundIndia) and 1:20 (at Fundsupermart) while it is 3:00 if you invest directly online through MF sites.

Comment: For all types of online investments you need to have a bank account with online money transfer facilities.

Though personally it is the best channel ever but I prefer FundsIndia over FundsSuperMart because…

  • The cutoff timing for equity funds is 1:20 in case of FundsSupermart while in FundsIndia it is 2:00.
  • You cannot invest until you make a KYC complaint through FundsSuperMart, whereas you can invest up to Rs 50,000 through FundsIndia even without KYC.
  • Fundsindia sends you prepaid courier and seems to have better customer service. So you really save your courier cost as well.

Conclusion: Take any channel you find convenient but to reach your goal of financial freedom you must invest in Mutual Funds!!!

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