How to start investing in mutual funds online?

For our previous generations, investments usually meant fixed deposits, post office saving schemes, or real estate. For the more adventurous ones, they might have invested in some shares of a couple of well-known companies. But not anymore. Investors today have an incredible variety of tools, some of which were unheard of a decade ago such as MLD, Crypto Currency, REIT, Peer Peer Lending, NFT, SGB, and ETFs. The new-age investor doesn’t shy away from taking calculated risks in his investments and investing in mutual funds is a great option for them. Dedicated apps help investors make MF investments with just a click. For seasoned investors, the switch from an offline mode to an online mode of investing in mutual funds could prove to be overwhelming.

Table of Content

• Why Should You Invest in Mutual Funds?
• Things to Consider Before Starting Mutual Fund Investments
• Modes of Online MF Investments
• Types of Mutual Funds You Can Invest in Online
• How to Start Investing in Mutual Funds Online?
• How to Track and Review Your Mutual Fund Investment
• Conclusion

Why Should You Invest in Mutual Funds?

Here are a few reasons why mutual fund investment makes sense for today's investor:

• Professional Management: Your money is managed by experienced fund managers who track the markets and make informed decisions on your behalf.
• Diversification: Instead of putting all your money in one stock or asset, a mutual fund spreads it across multiple securities, reducing your overall risk.
• Liquidity: Unlike fixed deposits or real estate, most mutual funds allow you to withdraw your money whenever you need it.
• Affordable Entry: You can start with as little as ₹500 per month.
• Tax Benefits: Certain funds like ELSS allow you to save up to ₹1.5 lakh in taxes under Section 80C.

Things to Consider Before Starting Mutual Fund Investments

Before you start investing in mutual funds online, you should know about the following:

• Do proper research before deciding on an MF scheme, depending on your financial goals, investment horizon, and risk profile.
• Examine the track return of the mutual fund investment. MF returns, however, shouldn’t be the only deciding factor. It is advisable to opt for a mutual fund house with large assets under management (AUM).

Suggested Read: How To Calculate The Returns On Mutual Funds

• Based on your risk profile, investment objectives, age, and time horizon, your investment portfolio must have the best mutual funds from different categories.
• Check and compare charges of different online mutual fund investment platforms.
• Check the taxation rules of equity, debt, and balanced mutual fund schemes.

Modes of Online MF Investments

Companies that manage mutual funds are called Asset Management Companies or AMC. You can purchase mutual funds investment schemes via either of the following ways:

• Directly from the AMC Website: MF investments purchased through the AMC of the particular mutual fund are called Direct Plans. The disadvantage of the mode is that you can invest in mutual funds of a particular AMC or fund house only. There are no distributor commission charges as you are buying directly from the AMC.
• Through an Integrated Platform: An integrated online mutual fund investment platform is a single account access that helps with investing, tracking, and managing all your mutual fund investments with various AMCs. Most such AMCs have mobile applications that make investing fast, safe and convenient. These platforms are distributors for various AMCs and are paid a commission by the AMC.

Suggested Read: Types Of Mutual Funds Available In India

Types of Mutual Funds You Can Invest in Online

Before you start investing, it is important to understand the different types of mutual funds available. At a broad level, mutual funds in India are categorised based on where they invest your money:

• Equity Funds: These funds invest primarily in stocks and are best suited for long-term goals. They carry a higher risk but also offer the potential for higher returns.
• Debt Funds: These funds invest in bonds and fixed-income instruments. They are relatively safer and work well for short-to-medium-term goals.
• Hybrid Funds: These funds invest in a mix of equity and debt, offering a balanced approach for investors who want moderate risk with steady growth.
• Index Funds: These funds passively track a market index like the Nifty 50 or the Sensex. They have lower expense ratios and are ideal for first-time investors.
• Solution-Oriented Funds: These are goal-based funds designed for specific financial objectives, such as retirement planning or children's education. They typically come with a lock-in period of 5 years or until the child reaches the age of majority.

How to Start Investing in Mutual Funds Online?

Before you start making MF purchases, make sure that your MF KYC is verified. You can complete your KYC at a KRA (KYC Registration Agency) online by filling out the KYC registration form and uploading the self-attested identity proof, such as PAN Card and address proof such as Passport/Driving License/Voter ID and also a passport size photograph. You will also have to complete the IPV (In-Person Verification) by SEBI-approved agencies.

There are some common steps for online mutual fund investments via the AMC’s website or an integrated mobile app:

Step 1: Open a new investment account on the MF website or App.

Step 2: Provide personal details for the investment.

Step 3: Fill FATCA form.

Step 4: Provide bank details.

Step 5: Upload an image of the canceled cheque.

Step 6: Verify KYC through Aadhaar.

Step 7: Select the best-suited mutual fund for you.

Step 8: Choose the payment type (SIP or lump-sum) and the amount.

Step 9: Transfer the requisite funds from your registered bank account. Some apps may require you to credit their wallets with funds before you can invest.

Step 10: A folio number is generated and the purchased mutual fund is added to your investment portfolio.

How to Track and Review Your Mutual Fund Investment

Choosing the best mutual fund and investing in it is just the first step; regularly tracking and reviewing it is equally important. Here are a few simple ways to keep track:

• Consolidated Account Statement (CAS): This is a single statement that captures all your mutual fund transactions across different fund houses under the same PAN. It is sent to your registered email address every month and is one of the easiest ways to get a complete picture of your portfolio.
• AMC's App or Web Portal: If you have invested through a specific fund house, you can log in to their app or website to check your NAV, returns, and account statement at any time.
• MF Factsheet: Every AMC is required by SEBI to publish a monthly factsheet for each scheme. It covers key details such as the expense ratio, fund manager, AUM, NAV, and how the fund has performed against its benchmark. Reviewing this occasionally gives you a clear sense of whether your fund is doing its job.
• Online Portfolio Trackers: If you have made mutual fund investments from various AMCs, online portfolio trackers can simplify the tracking process. These trackers consolidate your holdings, provide daily NAV updates and offer insights into your portfolio's performance. There are numerous apps in the market for this.

Conclusion

Intelligent investors often have a separate budget to fund their investments. The minimum investment required for a mutual fund via the Systematic Investment Plan (SIP) is Rs 500. Smart investors are disciplined, patient, and consistent in their approach. Don’t be just an investor, be a smart one.

If you are looking for a trusted partner to begin your mutual fund investment journey, Muthoot Finance is here to help. With decades of experience in financial services and a wide network of branches across India, Muthoot Finance offers expert guidance to help you choose the best mutual fund to invest in based on your goals, risk appetite, and investment horizon. Visit your nearest Muthoot Finance branch to know more.