A few years back, people often preferred to invest in the mutual funds through CAMS, Karvy, bank, agent or broker. Why? Simply, because there was no option to buy them online! In today’s fast paced technology world, when you can buy everything online – right from a soap to an air ticket, why not mutual funds?
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Fundamentally, there is no major difference between buying mutual funds from an online portal or through an offline broker. They both will levy entry and exit loads, or even waive off under certain circumstances. However, an online purchase definitely has an upper hand over a physical broker in the following ways:
- You can carry out all transactions at the click of a button! You don’t need to make those round trips to the agent. Time, money and effort – all utilized efficiently.
- You can save from falling in the trap of mis-selling. All the information is available crystal clear online for you to make the right decision.
- You can track your portfolio online – when you purchased/sold the funds, what is the NAV, how they are performing, and so on.
- You can buy, sell, switch or transfer to at the real time value. Had it been through a physical broker, you may have to fulfill the formalities, by the end of which you may already foregone the desired unit price.
If you are convinced, why investing online in the mutual funds is a good decision, let us tell you how can go about it.
Broadly, there are three methods of applying for mutual funds online. You may choose the one that best suits you, after weighing their pros and cons.
Asset Management Company (AMC) Websites
You can apply directly for the mutual funds on the websites of the mutual fund houses. Usually, most of them offer an electronic investment facility. According to a Securities and Exchange Board of India (SEBI) circular issued in September 2012, it became mandatory for all AMCs to offer separate direct plans for open ended schemes wef Janaury 2013. A purchase made directly through an AMC website has a higher NAV than that of other normal plans, because there is marketing or distribution cost involved.
How it works?
You can download the mutual fund application form from the AMC website, fill it and submit it at the office or third party collection centre. Along with the form, you also need to submit your first cheque, a copy of your KYC letter and a copy of your PAN card. In addition to this, you require to apply for a personal identification number (PIN). You can begin your online transactions by linking them to your bank account as soon as you get the PIN and folio number. Should you want to invest in some other fund house, you would be required to submit the form again along with the mentioned documents. However, you do not require submitting the KYC copy again.
A few of prominent AMC websites are as under:
- This is a very cheap method, as AMCs charge either nil or negligible fund management fee. You can get better returns on your investment.
- After the one time registration, you can manage your entire portfolio online.
- The first time registration of every mutual fund scheme requires the investor to approach the physical office or collection centres of the fund house. This is time consuming and also leads to paperwork.
- The more the number of funds you invest in, more user ids and passwords you need to apply for and remember.
Independent Web Portals
Some independent online portals allow you to invest in mutual funds electronically. They give a consolidated view of all mutual fund schemes from a single login.
A few of prominent independent portals are as under:
How it works?
To apply, you can log on to their website and create an account. Thereafter, you can attach the print out of online filled form and send it to them along with a cancelled cheque and a copy of your PAN card. The application documents can be printed easily from the website free of cost or be delivered at your doorstep at a nominal fee. You also need to produce necessary documents if you are not KYC compliant. After the receipt of documents, a full fledged verification process will be performed by the portal, before activating your account.
Once these initial formalities are done, your account gets created and you can begin browsing through the various available mutual funds schemes to pick the one that you find the most lucrative.
- They are a one stop place to buy and monitor all your holdings.
- You can study various in-house researches conducted by these portals before investing.
- It is mandatory to have a net banking facility.
- You cannot buy direct plans from here. For normal plans, you end up paying up higher transaction fee, which includes the commission earned by these portals.
Online Broker Platforms
In case you are interested to buy mutual funds from NSE or BSE exchange platforms, you can avail the services of online broker platforms. However, you must have an online trading account for this.
A few of prominent online broker platforms are as under:
How it works?
To buy mutual funds using broker platforms, all you require doing is to log on to your broker’s online trading terminal and pick the mutual funds schemes that interest you. It is suggested to seek advice from your broker before making the decision. Brokers, being the experts in this field, will understand your requirement and budget and help you find the best possible scheme as per the same. You can also request for an online Systematic Investment Plan (SIP) facility, if you are hesitant to invest a large sum of amount in one go.
- You can get a consolidated picture of all your investments in one single place.
- KYC requirement is waived off, since you have already fulfilled the formalities at the time of opening your trading account.
- The broker portals have a comprehensive information and comparisons of all types of mutual funds, to help you make an informed decision.
- The broker portals offer a limited number of schemes for investment.
- They charge anywhere between Rs30 to Rs100/- on each transaction
- In case you don’t have an online trading account, you have to open the same and bear account opening charges too.
- They do not sell direct plans.
Whichever method you choose to purchase mutual funds online, make sure you do a thorough research and learn about the various available schemes before making your final buying decision. If you are new to this type of investment, then it is advisable to seek advice from a colleague, friend or relative who has experience in this field or better still get in touch with a good broker to understand the various pros and cons of the available schemes. Lastly, take calculated risks and see your funds grow eventually!
Even today, people in India are not very clear about how to invest on SIP Investment Plan online. They do wish to invest but only know the traditional methods. Thank you for sharing this informative blog that helps reader understand the different channels through which mutual fund investments are possible. Great indeed.