In a simple one line, the mutual fund is a collection of money from investors to buy stocks or bonds. It is a pool of money where many individuals (investors) come together and pool their money, it is called a mutual fund. There are 45 AMC (Asset Management Company), commonly known as fund house. They design a fund scheme based on the particular objective. Every mutual fund scheme must have an investment objective. These AMCs have hired experts to manage the pool of money. They are known as fund managers. The fund manager decides where to invest the pool money for the maximum returns. That’s it for now if you want to know in detailed about what is the mutual fund, here is the detailed article on what is mutual fund? Now let’s go through how can one Invest in mutual fund in India.
It’s not that complicated as it seems at first. Here is the precise step-by-step guide on how to invest in the mutual fund?
#1. Get your CKYC done:
Be sure you are CKYC (Central Know Your Customer) compliant. This is the mandatory one-time requirement for investing in mutual funds or direct equity. Visit CAMS or CVLKRA to get yourself register for CKYC. You are required to submit a copy of your self-attested address proof, PAN copy, ID proof and a latest passport size photo. Alternatively, you can ask your mutual fund distributor to do it for you at no charge.
From July 1st, 2017, you have to link your Aadhaar card with your PAN number. It is now mandatory to link this. you can do it here: Link Aadhaar to PAN.
FATCA: Make your simple online FATCA(Foreign account compliance act) declarations.
#2. Account Set up:
Once the compliance part is done as mentioned above, now is the time to set up your account. This includes opening a DEMAT account with any SEBI registered broker, linking up your bank account with your demat account, setting up periodic SIP etc.
#3. Choosing your funds:
Choosing the right scheme is very important for best returns. There are 10000+ mutual fund schemes available in the market. Choose the one which suits your requirement and risk appetite. I have handpicked the best mutual fund schemes on the basis of detailed analysis and other parameters. Here are the Best mutual fund schemes.
#4. Do it yourself (DIY)
There are various ways one can construct a portfolio to invest in mutual funds. Goals, risk appetite, duration, market situation, investible surplus are key considerations in building a portfolio. So if you want to do it yourself and save on commission here is the way forward. Purchasing mutual funds directly would mean investing with the fund house directly without using distributor as an intermediary. This would mean a saving of both upfront and trail commission on your investment. I would suggest you invest in direct plans of mutual funds because there is no commission paid to the distributors on the purchase you made. Direct plans can help you gain 0.5% to 1.5% additional returns on your investment.
If you want to invest into the mutual fund and direct stocks, you can go for Zerodha as your online discount broker. Zerodha offers both direct and indirect plans of mutual funds.
Opening a DEMAT account with Zerodha is as easy as opening an account with any social media site. Zerodha offers industry-first instant account opening with Aadhaar card authentication.
I have my account with Zerodha, it took me 15 minutes to open a demat account without any hassle.
Zerodha’s Coin platform lets you buy mutual fund’s direct plans without paying any commission. You can directly buy funds from the mutual fund companies without any intermediate. They offer mutual funds, direct stocks, bonds, currencies all in one account. Zerodha is India’s first and leading broker with lowest charges. They are the one who brings the fix charges concept instead for % commission on your purchase. Fiest Rs. 25000 of investment through Coin is free. They charge Rs. 50 fix/month on the unlimited number of transactions. You can view your consolidated account statement online and through their state or art mobile app.
They offer very easy and flexible portal which a novice investor can also understand and use. They also offer features like start, stop, modify your SIPs at any time.
Save up to 28 lacs on an SIP of ₹5000 / month over 25 yearsInvest up to ₹25000 for FREE, Rs. 50 per month thereafter.