If you do not learn how to invest in mutual funds online now, You will hate yourself later. Find out how you can invest in mutual funds in simple and easy way.
Mutual Funds are a very good investment option. If you invest regularly in a disciplined manner while keeping investment holding period longer, you really have a very good chance to create wealth with these mutual fund investments.
There are people who want to buy mutual funds online. The problem they face is how to start. This is the reason for writing this article to help them in guiding about how to buy mutual funds.
First things first, before going for investing in mutual funds, make sure you have a your Permanent Account Number (PAN) Card. Current income tax rules have made it mandatory to have a valid PAN card for mutual fund investments.
Secondly, you need to be KYC or Know Your Client compliant.
KYC is a one time process to confirm your identity, residential address and occupation with the securities regulator.
If you are already a mutual fund investor,quite probably you are KYC compliant otherwise you would have to sign that form at any broker house.
It is important to mention here that before investing in mutual funds, you understand the risks associated with mutual fund investments.
It is also imperative that you do some basic research about the mutual fund scheme in which you are going to invest like the past performance of the fund, the track record of the fund manager and mutual fund house.
To understand the risk level associated with a mutual fund scheme, you may find the colour coding assigned to mutual fund schemes.
– Blue Colour is for Low Risk
– Yellow Colour is for Medium Risk
– Brown Colour is for High Risk investment schemes.
One can buy mutual funds via three methods which are available as Offline and Online mode.
Online investing has its own advantages over Offline method.
Let us see these methods –
How to Invest in Mutual Funds Online
Follow the following methods to invest in mutual funds :
Visiting a Broker
If you really don’t know anything about mutual fund schemes but want to invest in mutual funds,you may choose to visit local brokerage firms or securities office (CAMS) in your locality.
Almost all the banks provide services to invest in mutual funds now-a-days.
Just tell them the amount you wish to invest and the mutual funds to invest in and they will happily do it for you.
If you are unable to choose a fund scheme, they will suggest you some well performing schemes and you may choose accordingly.
Online Investment through Demat Account
You can buy mutual funds online through Demat (dematerialised) Account. For that you would need to have a Demat Account.
Demat Account is an online trading account through which you can do online stock trading, mutual fund buying, currency trading and many more things, depending upon the stockbroker with which you have your Demat Account.
Your savings bank account is linked to your Demat Account.
Investing in mutual funds through Demat Account is the most easy task to do. You may choose to buy either in lump sums or through Systematic Investment Plan (SIP) route.
Login to your Demat Account, head over to Mutual Fund section and find the ‘Place Order’ or ‘Purchase’ option there.
Just select the mutual fund scheme you want to invest in and allocate the funds you wish to invest and it is done!
The benefit of investing in mutual funds online through Demat Account is that it is so easy and convenient. You can also keep tracking your investment more regularly under your eye.
Moreover, the Demat Account providing broking houses keep providing their research reports on good quality mutual fund schemes which can be of much help to people choose a good mutual fund scheme for investment purpose.
But as they say ‘There ain’t no such thing as a free lunch’, the convenience of investing in mutual funds online through Demat Account also comes with a cost. These brokerage firms may charge you some fee as commission charges in return of their services.
The fee may be very small but free is free and if you can get the option to invest in mutual funds online without any cost, you should really consider that option.
Let us move on to that option of buying a mutual fund from their own website.
Online Investment through Mutual Fund Website
You can also invest in mutual funds online without Demat Account.
For that you would be heading over to the official website of the mutual fund house or company with which you want to make your investment. You can Google search that.
It is important to note beforehand that some of the mutual fund companies allow online investment to only those investors who are already investing with them and have a portfolio or Folio number.
This is like buying another mutual fund scheme from the same mutual fund company or adding more investment to your already existing scheme.
Some mutual fund companies allow you to invest as new investor if you don’t have any prior investment with them. This is true in case of lump sum investment as well as SIP route investment.
To start investing online,you would find and click a link Invest Online or Invest Now on that website. That carries you to a new page where you would find login options such as Investors with IPIN and Investors without IPIN. Third option you may see is Invest without Login. These options are for ‘Existing Investors’. You may also find another link there for ‘New Investors’.
IPIN is a PIN sent to your residential address when you register at their website with your existing folio number. IPIN authorises you to do online transactions such as purchasing,redeeming or switching in your online mutual fund portfolio. You can Invest without IPIN also.
You would choose any of the above option which applies to you. Next options you find after starting up are usually self explanatory. You are asked to enter your personal details.
You may see the option about choosing the Same Folio or New Folio for your investment. You may choose either of them, no issues about it. I am using the same folio number for all the schemes from one mutual fund company.
You would be asked to choose the mutual fund scheme you want to invest in from a list of all available mutual fund schemes.
Next you have to choose ‘Plan’ which can be ‘Dividend Plan’ or ‘Growth Plan’ for your chosen mutual fund scheme.
If you want only growth in your investment, you may opt for Growth Plan.
If you want periodic income on your investment, you may go for Dividend Plan. Further you would be asked to select the ‘Option’. For Growth Plans, the “Option’ is Growth and it is Dividend for Dividend Plans.
There are two modes of investment when investing online in mutual funds; ’Direct’ or ‘Through Broker/Distributor’.
You should choose ‘Direct’ as you want to buy mutual funds directly from the company and not involve any intermediary.
Out of next options for keeping investment in ‘Demat Form’ or ‘Regular’, you may go for ‘Regular’ as holding mutual fund units in Demat Form has no added benefits over Regular Holdings.
After choosing the mutual fund scheme for your investment, you would be required to furnish details about your bank account from which amount is to be debited.
You may choose to pay via Internet Banking,Debit Card,National Electronic Fund Transfer (NEFT),Real Time Gross Settlement (RTGS) or through Cheque or Demand Draft also.
If you wish to register an online SIP,you would choose the mutual fund scheme, the amount to be invested systematically, the frequency (weekly, monthly, quarterly) of investment, the date of amount debit and the tenure of your investment.
For making regular payments for investments, the mutual fund company shall be added as a biller to your bank account and you would confirm the same biller after logging in your internet banking at the ‘Add Biller’ link.
After the transactions are done to buy mutual funds online, the same start reflecting in your online portfolio after the payments are processed and ‘Units’ are allotted to your portfolio.It may take a day or two.
You also start getting monthly or quarterly consolidated statements for your investment.
The benefit of investing in mutual funds online through websites is that you are directly buying the funds from the mutual fund companies.
No broker, distributor or intermediary is involved, so there are no commissions charged to you. Purchasing is completely without any cost.
Each mutual fund company has little variation over the other as for as the process of online investment in mutual funds is concerned. Even then, it is quite a simple process.
With little bit of effort and knowledge, we can buy mutual funds online and enjoy the benefits of these investments.