How do I start investing in mutual funds? Complete guide
Once you have a clear understanding of the benefits of mutual funds and have decided to begin investing, you may look for the appropriate mutual fund schemes to help in your financial growth.
Various mutual fund categories are suitable for different investment horizons, assume multiple amounts of risk, and seek different rates of return.
So, the first thing you should do is decide clearly on specifics like how long you would like to invest, how much risk you would be able to face, and what type of profits you want.
When you are certain of these basic points, it will be easier for you to choose the category of mutual fund scheme that is best for you.
1. Your mutual fund KYC
According to the Prevention of Money Laundering Act (2002), the Know Your Customer (KYC) procedure is required for all financial institutions, including banks, insurance companies, and mutual fund firms.
Simply put, the KYC procedure involves checking the background of anyone who wants to sign up as a client of these financial organizations.
Establishing authenticity and making sure that the investments or deposits are made by a real person with valid identification is important. KYC can also assist in tracing any fraudulent transactions.
2. Start investing in mutual funds
You can begin investing in any mutual fund company’s schemes after your KYC is complete. You don’t need to do many KYCs for various mutual fund companies. You can invest using either the offline mode or the online option
3. Investing in mutual funds offline
The majority of options for investing in mutual funds in offline mode only offer regular plans of the schemes. A portion of your gains is removed from your investments in a mutual fund’s Regular Plan and paid to the agent.
However, there is no broker engaged if you invest in a mutual fund scheme’s Direct Plans. As a result, there is no commission to pay, which lowers the expense ratio.
The difference between an equity fund’s Direct Plan and Regular Plan returns often stays at or below 1%. Over time, this 1% difference may add up to a significant sum.
You can invest in mutual funds offline through distributors, banks, and NBFCs by going to the offices of RTAs like CAMS and Fintech, mutual fund companies, etc. Details are as follows:
- Registered Investment Advisors: To invest in mutual funds offline, you can also get in touch with SEBI-registered financial advisors in your area. You can invest in Direct Plans with them. However, there will be a price. This fee may be up to 2.5% of your capital investment or a predetermined sum of up to Rs. 1.25 lakh.
- Banks & NBFCs: Mutual fund programs are also offered offline by several banks and non-banking financial companies (NBFCs). To begin your investment journey, you must go to their office and speak with a representative, often known as a Relationship Manager (RM). They do, however, place your money in a Regular Plan so they can profit from your investments for the rest of your life. Therefore, even if the mutual fund schemes are not right for you, the RMs and agents may try to convince you to invest in them so they may earn a bigger fee.
- Mutual funds Distributors: Reaching out to a specific distributor of mutual funds is an additional offline option for investing in mutual funds. However, your money will be placed in a Regular Plan.
- Mutual Fund Companies: You could also invest offline by visiting the office of the mutual fund company and investing in the schemes there. The difficulty is that you must complete all the paperwork by yourself. Additionally, you have to go to each company’s offices separately if you would like to invest in a few of the best plans offered by various mutual fund businesses.
- RTA Offices: By visiting the offices of SEBI-registered RTAs like CAMS and Fintech, you can invest in mutual funds in the offline form as well. A group of fund houses is served by CAMS and Fintech alike. As a result, if you go to the CAMS office, you can only invest in the fund firms they work with.
How to Track the Performance of Mutual Funds?
4. Investing in mutual funds online
Online investing will be significantly quicker and less laborious than offline investing. You can choose a mutual fund that suits your goals by visiting the website of your chosen fund house.
Enter the required information and wait for the OTP to arrive on your registered mobile number. After that, you may enter the amount and choose whether you wish to invest via SIP or lump sum. You have two options for making the transaction: using your UPI ID or online banking.
For most fund houses, this is standard procedure. However, you will need to sign up to each fund house’s website separately if you would want to invest in a few of their plans.
However, the EduFund app has a number of mutual fund schemes offered by different asset management companies all in one app. You can choose the option that suits you and begin investing.
To go with it, you can also talk to financial experts on the app who will guide you to invest in the right schemes that suit your risk profile and investment strategy.
The mutual fund market has been working hard to attract additional investors ever since it began.
Earlier, completing the documentation for mutual fund investments used to be a laborious process, and completing your KYC required you to travel to an AMC or RTA office.
But thanks to the introduction of technology, all of these inconveniences are now gone. It can still be tough to choose the right plan for you.
What are mutual funds, and how do they work for beginners?
Mutual funds are investment vehicles that pool money from multiple investors to buy a diversified portfolio of stocks, bonds, or other assets. To start, research, choose a fund, and invest through a brokerage or directly with the fund company.
How much money do I need to start investing in mutual funds?
Many mutual funds have low minimum investment requirements, some as low as $100. However, the minimum amount can vary, so check with the fund company for specific details.
Where can I buy mutual funds?
You can buy mutual funds through brokerage accounts, online platforms, or directly from the fund company. Consider factors like fees and convenience when choosing where to invest.
What should I consider when selecting a mutual fund to invest in?
Consider factors like your financial goals, risk tolerance, fees, historical performance, and the fund’s investment strategy when choosing a mutual fund.
Are there tax implications when investing in mutual funds?
Yes, there can be tax implications, such as capital gains and dividends. It’s important to be aware of tax consequences and consult with a tax advisor for guidance.