What is the process for investing in mutual funds?

Investing in mutual funds can seem complex, but it doesn’t have to be. With the correct information and guidance, anyone can start investing and benefit from mutual funds. In this article, we’ll explain how you can begin your journey into mutual fund investing and why seeking professional help can be valuable.

The Basic Requirements to Invest in Mutual Funds

Before you start investing in mutual funds, you need to meet a few basic requirements:

1. PAN Card: A Permanent Account Number (PAN) is mandatory for all financial transactions in India.
2. Bank Account: For easy transactions, you need an active bank account linked to your mutual fund investments.
3. KYC (Know Your Customer): The KYC process ensures you are legally eligible to invest. It is a one-time process that involves submitting documents like your PAN card, address proof, and a recent photograph.
4. Self-attested Proof of Address: You need to provide a self-attested copy of your proof of address, such as a recent Aadhar card, utility bill, bank statement, or any government-issued document that clearly shows your current address.

You can check your KYC status on various platforms like:

• www.cvlkra.com
• www.camskra.com
• www.karvykra.com

If your KYC is incomplete, you can submit the required documents to any mutual fund distributor or through your chosen platform.

Ways to Invest in Mutual Funds

Once you have completed your KYC, you have several options for investing in mutual funds. These include both online and offline methods, each with pros and cons.

1. Investing Directly with the Fund House

You can invest directly by visiting the fund house’s office or through its website. When you invest directly, you invest in the fund’s “Direct Plan,” which usually has lower expense ratios than regular plans.

Pros:

• You get to invest in direct plans, which have lower fees.
• You have control over your investments.

Cons:

• You can only invest in one fund house’s schemes.
• Managing paperwork and selecting the right funds can be difficult without expert help.

2. Investing Through Mutual Fund Distributors or IFAs (Independent Financial Advisors)

You can invest through an AMFI (Association of Mutual Funds in India) registered distributor or an IFA. These professionals provide advice, help with paperwork, and track your investments.

Pros:

• You get expert advice and answers to any questions you may have about mutual funds.
• Distributors help with all the paperwork, making the process easier.

Cons:

• You cannot invest in direct plans through distributors as they can’t charge fees.
• They earn a commission based on the funds they recommend from 0.05% to 1.5% based on mutual fund performance.

3. Investing Through RIAs (Registered Investment Advisors)

Registered Investment Advisors (RIAs) are professionals registered with SEBI (Securities and Exchange Board of India) and act in a fiduciary capacity. They provide advice and help you invest in direct plans, but they charge a fee upto 2.5%* for their service, either fixed or variable.

Pros:

• RIAs offer comprehensive advice covering more than mutual funds.
• They can assist with paperwork and help you track and review your investments.

Cons:

• You need to understand their fee structure clearly before engaging with them.
• RIAs do not earn commissions and charge a separate fee for their services.

4. Investing Through CAMS/Karvy or MF Central

CAMS (Computer Age Management Services) and Karvy are mutual fund registrars and transfer agents (RTAs). You can access various mutual fund schemes through their platforms, either online or by visiting their offices. Additionally, MF Central, a joint platform by CAMS and Kfintech (Karvy), provides services for viewing and managing your mutual fund investments.

Pros:

• Free access to all principal AMC (Asset Management Company) schemes.
• You can invest in direct plans and have access to mobile apps and consolidated portfolio information.

Cons:

• These platforms do not offer financial advice or goal-planning services, so you’ll need to rely on an advisor.

5. Investing Through Your Bank

Many banks act as mutual fund distributors, allowing you to invest through them. You can do this in person or through their online banking platforms.

Pros:

• Banks have experienced relationship managers who can guide you.
• You can easily manage your mutual fund account through online banking.

Cons:

• You cannot invest in direct plans through banks.
• The advice may not always be unbiased.

6. Investing Through Robo-Advisory Portals

Robo-advisory platforms, like Grow, Paytm Money, Zerodha Coin, and FundsIndia, are online platforms that provide financial advice, help you manage your investments, and offer mutual fund transactions.

Pros:

• These platforms are user-friendly and have excellent interfaces.
• They offer easy and low-cost advice, including tax planning and portfolio analysis services.

Cons:

• Some investors may feel uncomfortable with minimal human interaction.
• With so many options available, it can be challenging to choose the right platform, and information overload can be overwhelming for beginners.

Why You Should Consult a Professional Advisor

While you have several options for investing in mutual funds, consulting a professional, such as a mutual fund distributor or a Registered Investment Advisor (RIA), can help you make more informed decisions.

1. Expert Advice: Mutual fund distributors and RIAs understand the complexities of investing. They can help you choose the right funds based on your financial goals, risk tolerance, and investment horizon.
2. Saves Time: By working with an advisor, you avoid the hassle of handling paperwork, tracking your investments, and making changes to your portfolio. They can do this for you, saving you time and effort.
3. Tailored Investment Strategy: A professional advisor will help create an investment strategy that aligns with your goals. Whether you’re saving for education, retirement, or a big purchase, they can help you stay on track.
4. Navigating Market Changes: Mutual fund markets can change due to economic conditions. A good advisor will keep an eye on these changes and advise you on the best course of action.

Conclusion

Investing in mutual funds is an excellent way to grow your wealth over time, but it’s essential to do it correctly. Whether you choose to invest directly, through a distributor, or with an advisor, it’s crucial to understand your options. Consulting with a professional can simplify the process, provide expert advice, and help you achieve your financial goals with less stress.

Mutual fund distributors and advisors are key partners in your investment journey, offering valuable insights and guidance to ensure you make the right decisions. By seeking their help, you can avoid common mistakes and maximize your returns while staying focused on your long-term financial objectives.