Investment into mutual funds have grown tremendously over the years and mode of delivery has also improved. Earlier where only large financial institutions and Financial advisers dominated the market but now there are many options to choose from. And, first-time investors get really confused on whom to approach to buy investment plans. The blog post details on how to invest in mutual funds with or without Demat Account. We will also explore on how to invest in mutual funds through various channels.
How to invest in mutual funds Without Demat Account
The First Thing
Those who are first time investor in a mutual fund need to possess certain documents which are compulsory. These include PAN Card, a Bank Account (should belong to the investor), a cheque book and should be KYC (know your customer) compliant. These are the basic documents one needs to have if they are investing in a mutual fund. Those investing through online should have a proper digital payment mode.
For the first time investors, it is normal to not be a KYC compliant. To be a KYC compliant individual, he/she needs to submit the KYC application form with following documents to the financial advisor or fill e-KYC (if doing online) to get registered.
- A recent passport photo
- Proof of identity (Adhar, Voter ID & Passport or documents notified by govt.)
- Proof of address (Adhar, Electricity Bill or documents notified by govt.)
Those who have completed the process earlier can check the status through this website.
Different Channels for investing in a Mutual Fund
Through Financial Institutions
There are wide range of financial institutions that offer mutual fund service. These include Banks, stock brokers and distribution companies. These institutions are required to have registration with AMFI (Association of mutual fund of India) to be eligible to offer the services.
Independent Financial Advisor (IFAs)
IFAs offers personalised investment service to the investors. This ranges from investment consultation to managing the portfolio. IFAs act as an agent for the Asset Management Companies(AMC) and sell it to the customers. AMC pays IFAs commission on the sale of every mutual fund schemes. These commissions are included in the mutual fund expense ratio.
Directly from Asset Management Companies (AMC)
An investor can directly approach the asset management companies (through office or online) to make an investment in the schemes. Investing directly through AMC gives you the benefit to invest in direct plans which is not available with the Financial Institution and Independent Financial Advisors.
Through Online Portals
Nowadays, Mutual fund services are also offered through third party online portals. These online portals can be hosted by private players or govt. backed institutions. These portals have to be mandatorily registered with AMFI, in order to provide the services. Following are the list of important online portals through which you can invest in mutual funds.
Bodhik.com is a robo advisory firm which offers investing and consultancy services in mutual funds. The services are provided through an algorithm based programme and sound research which helps to get the best-suited investment plans as per the information provided by the users. The system eliminates the human biases and emotions involved in the decision making process of investment thereby suggesting most suitable plans aligned with the investment objective.
Recently, many mobile wallet companies including Freecharge and Paytm, have started to offer financial services in their platform including mutual fund and insuAll Postsrance, but it is better to wait for the platform to mature enough.
Investing in mutual funds With Demat Account
An investor can also make investment in mutual fund through their Demat Account. For this, the investor needs to place an order with the broker he/she is maintaining account with. The investor needs to provide all the details of scheme he/she interested with and the amount will get deducted from the bank account linked with the Demat Account.
All the unit purchased gets credited into the Demat Account. It helps the investor to track the investment portfolio easily without the fear of loss of units.
Investors investing through other channels other than Demat account can also transfer their mutual fund units to the Demat Account. The simple steps involved in to transfer the units are:
- Obtain a CRF form from your Depository Participant (DP)
- Submit the CRF form with details along with Statement of Account with the DP
- After verification of the form, your DP will send it to AMC/ Registrar for further process
- After the verification of details by AMC/ Registrar, the transfer of all units will be executed by the DP and will get credited in your account
As we have discussed various options to invest in the mutual fund in details, it is better to know which platform is suitable for which type of investors. Those investors who are investing for the first time in the mutual fund and those who have limited knowledge on the subject should opt for consultancy based options like Independent financial advisors, Financial institutions and online portal like bodhik who can help in making the investment plan more effectively. The seasoned investor can opt to invest directly through AMC, MFutility. The segregation is only for the knowledge purpose and investor can choose any platform according to their need.