Some years ago, investing in mutual fund required you to call an agent and invest through him. A form was filled and you obliged with few signatures. This sort of convenience came at a price that agents charged in the form of their commissions. However, with amazing technological advances, the process has changed now. Moreover, as SEBI eliminated entry loads, there are now several other methods of investing in Mutual Funds. Let’s take a look at how to invest in mutual funds:
Investing through agents is an old but convenient way of investing in mutual funds. Just call up an agent and inform that you would like to invest in mutual funds. The agent visits you and fills some forms that you need to sign. As entry loads have been abolished now, you have to reimburse the agent in the form of commission on the corpus invested. The agent may charge anywhere between 1 to 2% of the corpus to be invested. 1% is a decent fee for all his services including filling the forms, taking them to Mutual Fund offices and getting them processed so just check you don’t pay him extra. However, if the agent offers you valuable advice on which mutual funds to buy or the ones that will suit you and help you reach your investment objectives, you may pay him more. Compensating him for important guidance seems sensible. You have to be cautious about the details filled in the form so check the forms carefully. If possible, fill the form on your own.
You can seek help of an agent if ease and comfort are your priorities. Search online with different parameters to know more about the mutual funds agents operating in your city.
- AMC (Asset Management Company)
You can invest directly through Mutual Fund companies or an AMC. There are many companies who offer online investing facility. To begin with, you need to visit the AMC office and invest in a specific mutual fund. The company will give you a folio number, like a bank account number, it is a unique number to identify your holdings with respective mutual fund. This is the first time you invested in that mutual fund. For further investments in that fund, you can use the same folio number and invest online through their site. This method ensures that your entire corpus gets invested and no charges are deducted. For instance, if you invest Rs. 1000, the entire amount gets invested. The only problem is the physical exertion required at the initial stage; visiting the office personally and doing the paperwork. Also, if you look forward to investing in different funds from various AMCs, you have to visit all of them individually for the initial process.
This method appears sensible when you have a large corpus and you are looking at term investment. Through this approach, you can save lots of money that otherwise might go away in commissions. Take for instance; you want to invest Rs. 5,000 per month in mutual funds. In the absence of a commission structure, you can save great deal of money, especially during a long term investment as you are not paying commissions to any agent.
- Demat Account
Demat account is one of the most versatile means of investing in mutual funds. Your demat account allows you to check out the different mutual funds available on the website. You can simply invest in funds/fund of your interest by clicking on them. Nonetheless, you need to shell out commission because here banks act as agents. Some banks charge a fixed fee while others ask percentage based charge. For instance, HDFC Bank charges Rs.100 for each quarter regardless of the sum invested whereas ICICI charges 1.5% per SIP or Rs 30, whichever is lesser. Trading through a demat account enables you to exercise control over everything from your end. A few big players offering online mutual funds trading include HDFC Securities, Indiabulls, ICICI Direct, Sharekhan, Motilal Oswal, etc.
- Karvy or CAMS
Karvy is the trading processing enterprise which caters to almost every mutual fund in our country. They handle all the transactions and send the report to the investor. You can directly invest through Karvy or CAMS by downloading the mutual fund application from the AMC website. Take a print out and fill the application before submitting it to the nearest Karvy or CAMS Investor centre. You can search online for the list of Karvy centres in your city and different AMC applications available for download.
- Through Portals like Financ
There are several web portals like Financ, FundsIndia that can be accessed for investing in financial instruments and Mutual funds. You need to register and open an account and we will deliver all the necessary documents right at your home without any charges. We support NRI customers, SIP, STP besides VIP Investing. At Financ we offer convenience and value added services.
Before deciding on the method for investing in mutual funds, you need to think about convenience and cost. For long-term investment, you should choose the method that involves less or no commissions. Conversely, investing through a financial advisor gives you an assurance of investing in suitable funds. In that case, paying commissions would help earn higher returns.
How do you prefer to invest in Mutual Funds? Share us your experiences in the comments!