How to Invest in Mutual Funds Online

June 7, 2022 Mutual Fund

Mutual Funds are one of the best investment avenues to accumulate wealth for your various financial goals. Once you have zeroed in on the best and most suitable mutual fund scheme for your portfolio, the next question is, how do you go about investing in mutual funds?

You can invest in mutual funds offline by visiting the nearest branch of a mutual fund house or a mutual fund distributor and submitting a duly completed application form along with other relevant documents such as proof of identity, proof of address, cancelled cheque leaf, and paying the required investment amount.

Or else, you can choose to invest in mutual funds online from the comfort and convenience of your home. There are different ways to invest in mutual funds online…

1) Invest in mutual funds online directly with the AMC

You can buy mutual fund units online directly from the Asset Management Company’s (AMC’s) website. Before you proceed, you need to check whether you are KYC compliant. You can complete the KYC process online with OTP-based Aadhar authentication if you are a new investor.

Once the KYC process is complete, you can proceed to invest in the scheme you are interested in by following the below process:

• Open a new account with the AMC by providing relevant personal details

• Fill in the required investment details such as:-

  – Selecting the desired scheme

  – Select the plan type (Direct) and option (Growth or Dividend)

  – Mode of investment — one-time payment or SIP, etc.

  – Enter the investment amount and frequency (in case of SIP)

• Provide bank details and mode of payment — net banking, debit card, etc.

• Verify and complete the transaction

Do note that if you are investing in schemes belonging to different AMCs, you will have to perform the same procedure with each AMC. This could make the investment process complex and time-consuming.

The Registrar & Transfer Agents (RTAs) of mutual funds such as CAMS and KFintech also facilitate online investing. However, the investment will be limited to the AMCs serviced by them.

2) Invest in mutual funds online through a Demat account

If you have an existing Demat account, you can use it to transact in mutual funds online. All you have to do is log in to your Demat account and look for the option to invest in mutual funds. Then select the scheme you want to invest in and enter the investment amount to complete the transaction. Once the process is complete, the mutual fund units will be credited directly to your Demat account. Do note that once you hold mutual funds in Demat form, all transactions (including stopping or redeeming investment) will have to be done only through the Demat account.

The benefit of investing in mutual funds through a Demat account is that it is a convenient option to invest and track all your mutual funds, equities, and bonds in one place. However, additional charges may be applicable when you invest in mutual funds through a Demat account, such as annual maintenance charges, transaction charges, etc.

3) Invest in mutual funds online through investment platforms

Investment in mutual funds can be made online in an easy and hassle-free way through investment platforms. Mutual Fund investment platforms offer single-point access to help you with investing and tracking your transactions with different AMCs.

The following steps are required to invest online using a mutual fund investment platform:

• Create an account with the mutual fund investment platform

• Fill in a few personal details such as name, PAN, Aaadhar, and bank details

• Select the scheme you wish to invest in (you can select multiple schemes)

• Choose the mode of investment (SIP or lump-sum) and the amount

• Make the payment to complete the investment

Benefits of choosing Direct plan over Regular plan

Every mutual fund scheme offers two plans — Direct and Regular. The main difference between the two plans lies in the expense ratio. When you opt for the Direct plan, mutual fund houses do not have to pay commissions to distributors. As a result, the expense ratio of the Direct plan is usually 50 to 100 basis points lower than that of the Regular plan.

The lower expense ratio results in higher NAV for investors in the Direct plan. Over the long run, the higher returns under the Direct plan can make a substantial difference to your investment corpus compared to investment in the Regular plan.

This article first appeared on PersonalFN here