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How To Invest In Mutual Funds

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Download our most popular free guide – 10 Steps to Select Winning Mutual Funds

Congratulations on finally deciding to step into the investment world of mutual funds.

It is convenient and easy, coupled with the inflation-beating returns from equity funds. This is a productive way to multiply surplus income and savings to achieve your financial goals.

As a newbie, you may be wondering about how and which mutual fund schemes to invest in.

With innovations in technology and investor-focused regulations, you can invest in mutual fund schemes in multiple ways. And, before we explore the different avenues you can choose from, let’s understand that mutual funds offer two different plans for every scheme:

  • A regular plan, for investors investing through a distributor, and

  • A direct plan for investors coming directly to the AMC or through an Investment Adviser


The plans differ from each other only in terms of cost. The regular plan charges a higher expense ratio, as compensation to the distributor. The direct plan, is devoid of this additional cost, hence, investors benefit with higher returns.

If you prefer simplicity and the process of investing sounds incomprehensible, opt for a mutual fund distributor. They will take care all administration, paperwork activity such as form filing, etc. All you need to do is submit relevant documentation and sign on the dotted line to begin your investment journey in mutual funds.

Just remember, “caveat emptor”... Buyer Beware.

Yes, there are several cases where distributors have mis-sold mutual fund investments. So, you need to read the fine print carefully before you sign anything.

When it comes to a direct plan, if you are tech-savvy and have basic financial knowledge, investing in mutual funds though this route will be a much better option. You can seek guidance from a fee-based mutual fund investment adviser about the right mutual fund schemes for your financial goals.

Investing through the direct route is a much better option as you can save a significant amount of money over the long term.

But before you embark on the journey of investing in mutual funds, you need to complete your KYC (Know Your Customer) formalities. KYC is a prerequisite for investing in mutual funds (and almost all financial instruments). It is vital compliance on the part of financial product manufacturers, to know their investor better.

KYC For Mutual Funds


The Government has appointed the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) to establish a central KYC registry, which simplifies the process of complying to KYC procedures  —  and you need to do it just once; either with a bank, mutual fund, or an insurance company that you’ve invested in. This means you don't have to fill-up the KYC form another time with other financial product providers.

If you’ve opted for a regular plan, i.e. investing in mutual funds through a distributor, they will assist you with KYC compliances. However, if you plan to invest in mutual funds through the direct route, you can complete your C-KYC through five simple steps outlined below.

Offline KYC For Mutual Funds


Prerequisites


The list of acceptable documents for Proof of Identity and Proof of Address is published at the bottom of the KYC form.

Fill up the form and attach attested copies of your documents. You will then need to visit the office of the AMC or that of the registrar with the originals. Once verified, your KYC will be registered.

You can check your KYC status here: https://www.karvykra.com/upansearchglobalwithpanexempt.aspx

Online KYC For Mutual Funds

To comply with the KYC process online all you need is:

✔Internet Connection

✔Working Web Camera

✔Self-Attested scanned copies of your photo identity and proof of address

✔Signature on a plain paper

Step 1: 

Log into ekyc.quantumamc.com. Enter your PAN number and it will confirm your PAN number validity. It will also check if your KYC is already verified.

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Step 2: 

Next, enter your other personal details such as Mobile Number, Email, and Aadhaar (UID) Number. On the next page, you are required to enter further details for Central KYC purpose.


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Step 3: 

Now you need to upload self-attested scanned copies of your pan card and address proof. And for the signature, you need to sign on a plain paper piece of paper and take a photograph of it. 

Please note that, SEBI permits investments upto Rs 50,000 for each financial year per mutual fund for Aadhaar based e-KYC  for mutual funds using OTP verification. Once the Rs 50,000 limit is crossed, it requires you to undergo the in-person verification procedure.

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Step 4: 

Next is your In Person Verification (IPV). Unlike the physical verification, here your live video is recorded through your device camera.


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Hence, there is no need for you to physically visit the AMC. Everything is possible and at your convenience.

Step 5: 

Confirm all your information and submit it. Lastly, all you need to now is wait for 2 weeks while your KYC will be uploaded on Central KYC servers and will be verified during this time period. Further, you will also get a confirmation e-mail about your KYC Status. You can also check your KYC status here. 

After the entire process is done, you will receive a 14-digit identification number- KIN (KYC Identification Number). And lastly, your FATCA declaration will also available in the same KYC form.

Complying with the Mutual Fund KYC procedure can get you started with investing in a wealth creating investment avenues such as mutual funds. You would not be expected to invest in mutual fund schemes from Quantum Mutual Fund; all they’re doing is lending you a helping hand, facilitating your journey to financial freedom.

Now that you have completed your mutual fund KYC, you can invest in mutual funds.

Investing in mutual funds through a distributor


If you are investing in mutual funds through a distributor such as a bank or investment broker, they will assist you with the transaction forms and other required documentation. Some big distributors may offer online investment facilities to add to the convenience, while local distributors may offer purely offline services. The advice and service might be more personalised in the latter. Some may charge an additional fee for services offered, in addition to the commissions earned from your mutual fund investments.

If you would like to save on costs, you may opt for the direct route.

How to invest in Mutual Fund Direct Plans?

If you decide to invest in mutual funds directly, here are the different paths:

  • AMC or Registrar office: Once you have decided in which fund to invest, you can visit the nearest AMC office or the office of their registrar to invest in the mutual fund. Here is a list of AMC offices – AMFI Link.

    If you prefer the online route, you may invest in mutual fund schemes directly through the online portal of the fund house. However, if you have multiple funds, you will need to register and invest in each fund house individually. This can be inconvenient if you have a number of schemes from different fund houses. The registrars also facilitate online investing in mutual funds, however, the investment will be limited to the mutual funds enrolled with them.

  • Mutual Fund Utilities: Mutual Fund Utilities is a shared platform of different fund houses. You need to create an account first, before transacting. We explain how you can create a Common Account Number (CAN) later in the article. You can transact in mutual funds of almost all the AMCs. Through a single transaction form, you can invest in multiple funds of different fund houses.

    You can even invest in mutual funds though the online route. Once your CAN is created, you can invest in mutual fund schemes through the portal of mfuonline.com.

  • Investment Adviser: If you hire the services of a fee-based investment adviser, you may send over your transaction documents to them to begin investing in mutual funds. Your investment adviser will also receive newsfeed from the fund house and they can keep track of your mutual fund investments.

    There are several online automated investment portals, also known as robo-advisers. These are investment advisers who enable investment in direct plans at a nominal fee. The fee structure varies from one portal to another. Some offer their services free, up to a certain monetary limit. Do check the services offered before you invest in mutual funds through them. Choose one that has an established track record of picking the best mutual funds.

Investing through Mutual Fund Utilities gives you access to all the major mutual funds. Hence, if you are solely seeking a transaction portal, as of now, this is the best offering. There is no additional charge for mutual fund investments made through this portfolio. The cost of the platform is shared by the participating fund houses.

How to invest in Mutual Funds through MF Utilities?

Mutual fund transaction portal, MFU (Mutual Fund Utilities) is a single window for you to transact across mutual fund schemes using a Common Transaction Form (CTF) or through the online portal. All you have to do is first create your Common Account Number (CAN), which is a unique reference number issued by MFU.

For existing mutual fund investors, the CAN will map all existing mutual fund folios across fund houses (participating in MFU), thereby providing a consolidated view of all mutual fund investments in India.

Below are the few pre-requisites for creating a CAN-

  • You should be a regular KYC compliant (other than Aadhaar based KYC)

  • The bank account which you decide to register should be your default account in your existing mutual fund investments, if any.

STEPS to CREATING an e-CAN

Below are the steps to help you create an e-CAN:

Step 1: 

Visit: https://www.mfuindia.com/eCANFormFill

Enter your email id and click on ‘New Form’. 

How To Invest In Mutual Funds05


Next, it will direct you to the page you see below.

Step 2: 

You need to select the CAN criteria, i.e. either partially electronic or completely electronic.

How To Invest In Mutual Funds06

Once you fulfil all three pre-requisites, select the option “Completely Electronic”. If not,

you can opt for “Partially Electronic”

Step 3: 

Select your holding type. It can be either Single, Joint or Either, or Survivor. Next, enter the number holder for the CAN you are creating.

Please note that for each type of your holding you will have a different CAN number. So if your Fund A has Single holding, your CAN will be xxxxxx15. And for Fund B, which is Joint holding, your CAN will be xxxxx17.

Further, it is mandatory to fill up all the KYC details, Bank account details, FATCA details, and nominee information. You can register upto 3 bank accounts under CAN.



How To Invest In Mutual Funds07

And you are through!!

Once you successfully finish inserting all your details, you will receive a provisional e-CAN number. Once your address proof, identification proof and bank account details are verified by MFU, your permanent CAN number will be generated.

If your registration is completely electronic, this message, as shown in the screen shot below, will be generated.

How To Invest In Mutual Funds08

A link will be sent to your email; where, if need be, you will have to upload relevant documents. 

Please note if your KYC details sourced by MFU from KRAs / CERSAI / RTA is unsatisfactory  your record will be converter to Partially Electronic. You will receive a prefilled eCAN Registration Form, which needs to be filled up and submitted along with necessary documents/proofs at a MFU Point of Service (POS).

If your registration choice was Partially Electronic then, you should print the “eCAN Registration Form”, fill in the details and sign. Further, you need to attach the necessary documents and submit it at any of the MFU POS for further processing. Once your document verification is complete, your CAN will be approved and activated for further transactions.

How to invest in Mutual Fund SIPs?

To invest in Systematic Investment Plans (SIPs) of mutual funds, there are broadly two ways:

i)  offline; and

ii) online.

In case of the former, approach the office a mutual fund house / mutual fund distributor / agent / relationship manager / investment adviser.

Here’s what you need to do to start a Mutual Fund SIP offline:

  • Select a mutual fund scheme that best suits your needs, investment objectives, financial goals

  • Fill in the Common Application Form / SIP form carefully and completely, mentioning the name of the mutual fund scheme and other details 

  • Provide your NACH mandate form stating all details of your SIP.

  • Hand over the forms (as mentioned above) to the office of mutual fund distributor / agent / relationship manager / investment adviser / Certified Financial Guardian, or you can even directly submit to Registrar and Transfer Agents (RTAs) / AMC.

If you choose to invest in a SIP mutual fund online, you can log in to a particular mutual fund house’s website, or use other transaction platforms viz. MFU, or opt for services of robo-advisory platforms, and follow the steps and instructions mentioned.

In case you are investing through MF Utilities, you need to submit the PayEezz form. PayEezz is a facility offered by MFU, where an investor can register a one-time mandate and provide a standing instruction to his banker authorising MF Utility to debit his/her account for future subscription transactions (Lump sum or SIP).

By registering under PayEezz, investors need not issue cheque or other payment instructions every time they make an investment through MFU. There is an upper limit mentioned in the PayEezz mandate.

Once a PayEezz is successfully registered and the PayEezz reference Number (PRN) is communicated by MFU, investors are free to register any number of SIPs quoting the same PRN. However, investors/distributors/RIAs should note that the cumulative debits in a day cannot exceed the maximum limit mentioned in the PayEezz mandate.


How to select the best mutual funds to invest in?

Well, no one has a magic crystal ball that can foretell which mutual fund schemes will top the list over the next decade. However, through years of experience, one can define a process that can be used to shortlist potentially the best mutual fund schemes for the future.

Besides, putting all your eggs in one basket can prove perilous. Hence, there is a need to diversify the investment over a set of schemes that have the capability to deliver superior risk-adjusted returns and have dealt with the market conditions tactfully. After all, you require mutual fund schemes that stand by you in good times and in bad – meaning, the schemes need to manage the downside of the market well, apart from generating sound returns in a market rally.

Star ratings can be indicatively used while selecting winning mutual fund schemes; but, these can in no way be the conclusive criteria. Instead, doing a need-based analysis is necessary. This ensures you take into account your risk appetite, investment objective, investment horizon and financial goals, before you zero down on mutual fund schemes.

PersonalFN follows a stringent scoring model, which ensures that the scheme is tested on various quantitative as well as qualitative parameters. This is compared with and scored vis-à-vis other contemporary schemes. The ones that pass through our rigorous test and achieve the maximum composite score on all parameters (based on pre-specified weightages) get a higher star rating.

PersonalFN understands that not all investors are equipped with the know-how to select the best mutual fund schemes for their portfolio. One would have to spend hours analysing mutual fund schemes in order to arrive at the right list for them. Thus, PersonalFN saves you the time and does the number-crunching work for you.

With hundreds of equity mutual funds available, how do you pick the right ones for your portfolio? Opt for  PersonalFN's 'FundSelect' service. It is the simplest and potentially the best way to grow your portfolio value significantly! One of the most important characteristic of FundSelect service is, it helps you zero-in on the top-performing funds across varying market caps and investment styles — be it large-cap, mid-cap, multi-cap, value-based or balanced funds. And with highlights of the underperforming or average performing ones too.

To conclude…

Investors should remain focussed on their long-term financial goals and invest in the right mutual funds to fulfil these goals. The basics of investing in mutual fund schemes remain the same.

If you need research-backed recommendations opt for PersonalFN's FundSelect Plus. This model mutual fund portfolio service ‘FundSelect Plus’ has completed a decade, and we are offering subscriptions at a massive 75% discount! Don’t miss out this Special Anniversary Discount. Click here to Subscribe now! 


Download our most popular free guide – 10 Steps to Select Winning Mutual Funds

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