How to Invest in Mutual Fund

1. Introduction:

Like, many mutual fund schemes to choose from, there are several ways in which one can invest in them. In this article we discuss the ways in which we can invest in mutual funds.

2. Pre-Requirments to Invest:

To start Mutual Fund investment, you need a PAN, a Bank account and be KYC (Know your Customer) compliant. If you are not sure about your KYC status, you should check at any of following website of KYC registration agency by entering your PAN.

a. www.cvlkra.com

b. camskra.com

c. www.karvykra.com

d. kra.ndml.in

e. www.nsekra.com

The need for KYC is to comply with the SEBI’s regulation in accordance with the Prevention of Money laundering Act, 2002 ('PMLA'). If your KYC is not done, you need to get it done at any place you choose to invest through, in Mutual Funds by submitting following documents:

a. Filled KYC form

b. Recent passport size photograph

c. Self-attested PAN Card copy

d. Self-attested Proof of address copy

Remember, KYC is just a one-time process and once done, you can invest in any mutual fund scheme through any below-mentioned way.

3. Ways To Invest in Mutual Funds:

There are both online and offline methods and each has its own pros and cons. Let’s discuss:

1. Directly with the Fund house:

a. Pro:

i. You can invest in Direct plans as well.(We have a separate article on what are Direct and Regular Funds)

b. Cons:

i. Can only invest in one Fund house’s scheme.

​ii. Selecting the fund house and doing all the paperwork yourself can be tough.

2. Through distributors/IFAs (Independent Financial Advisors):

You can also invest through AMFI registered distributors who can give you basic Mutual Fund advise, explain all the Mutual Fund jargons, and can help you in doing all the paperwork as well as sending reports etc.

a. Pros:

i. You get basic advice and can ask your Mutual Fund related questions.

ii. No paperwork headache, IFAs help you with that.

iii. Tracking your investments and suggesting the changes

b. Cons:

i. You cannot invest through Direct Plans.

ii. Risk of biasness based on their commission on each fund scheme.

3. Through RIA (Registered Investment Advisors):

RIA are investment advisors registered with SEBI. They act on fiduciary capacity. They do not get any commission from Mutual Fund and would have you invest in direct plans but do charge a fixed or variable fee for their advice.

a. Pros:

i. Unbiased advice.

ii. Can help you with paperwork and help you track and review your investment.

iii. Can invest in Direct plans.

iv. They act as complete financial advisors for you with knowledge outside Mutual Funds as well.

i. ​​​​​​​You need to issue them separate cheque for their services as they do not get any money as commission.

ii. You should be very clear on their fees structure.

​​​​​​​4. Through CAMS/Karvy or MFU:

CAMS and Karvy are R&T agents of Mutual Funds and gives free online access to many AMC’s schemes. Individuals can go to CAMS/Karvy office to open their Mutual Fund account and KYC registered customer can do it online as well through their website. Similarly, MFU (Mutual Fund Utility) is a new initiative of Mutual Fund industry where many AMCs have come together to bring investor convenience, information consolidation and bring operational efficiencies

a. Pros:

i. Completely Free online access to all major AMC schemes.

ii. Can invest in direct plans as well.

iii. Mobile apps and consolidated info gives convenience.

iv. Even RIAs and distributors use these platforms to give you online access to your portfolio

b. ​​​​​​​​​​​​​​Cons:

i. Currently not all AMCs are registered with these platforms and therefore you may not get complete choice.

ii. These platforms do not give any advice or goal planning, etc. and you will have to depend on your advisor or do it yourself.

• R&T- Registrar & Transfer agents are the institutions that register and maintain the records of the investors transaction for convenience of mutual fund houses.

5. Through your Bank:

Most of the banks also act as Mutual Fund distributors. So, you can approach your bank to open a Mutual Fund account as well which can be easily integrated with your online banking account.

a. Pros:

i. Banks have relationship managers who have sound knowledge of financial industry.

ii. Convenience of managing your mutual fund account through your online banking is great.

iii. Convenience of nearby bank branch for any query, changes, advice or cheque submission etc.

b. Cons:

i. You cannot invest in direct plans through them.

ii. Risk of not getting an unbiased advice

​​​​​​​6. Through many Robo-advisory Portals:

• Investyadnya.in: Our own robo-advisory portal where you can make your complete financial plan by entering your income, expense and networth info and based on various algorithm, it gives you a complete financial plan and advice. You cannot buy assets on our platform.
• FundsIndia: One of the first and biggest in this space where you can invest in various recommended Mutual Fund schemes. They also help in all your paperwork for free. They do not allow investments in direct plans.
• Scripbox: Another famous portal which has a fixed mutual fund portfolio basket in which you can invest. They keep on changing this basket as the market scenario changes. Does not allow investments in direct plans.
• Invezta: They allow investment in direct plans but charge a fixed yearly fee for opening and managing the mutual fund account.
• Paytm Money: They allow investments in direct plans at completely free of cost.

There are many others like them. You should see them similar to financial advisors who are not human.

​​​​​​​​​​​​​​a. ​​​​​​​​​​​​​​​​​​​​​Pros:

i. These portals have a great User interface.

ii. Biggest benefit is easy and low cost advise given by these portals.

iii. Value added services such as creating financial plan, tax planning, insurance planning etc.

iv. Excellent analysis and reports on your portfolio.

b. Cons:

i. Minimal human intervention can make you understandably apprehensive about the advice.

ii. Too many options available in the market make the choice very complicated and once stuck, it is difficult to come out of it.

iii. These portals tend to do information overload which might be overwhelming for amateur investors.