How to invest in Mutual Funds?

Mutual Funds can be a powerful vehicle to get FInacial Freedom. There are several websites, blogs and magazines dedicated to the same. But do you know different channels through which you can invest in Mutual Funds?

There are mainly 6 channels

1. Your Demat Account
2. Through advisors/ banks etc
3. Online through respective Mutual Fund Sites
4. Direct through Mutual Fund registrars - CAMS/Karvy
5. Direct to Mutual Fund Offices - by post/physically hading over
6. Dedicated websites which offers various mutual fund schemes

We take a detailed look at advantages & disadvantages along with the process for investing through each channel

Demat Account

Demat Account makes sense only for people investing directly in stock markets and so not everyone would have it.

Advantage:

• You can buy/ redeem a MF with click of few buttons right at the comforts of your home.
• You have consolidated portfoilo in one place. So becomes easy to manage.
• No tedious process of form filling or giving documents every time you buy MF.
• Invest instatly. Suppose markets fall suddenly @ 2:30 then you can invest before 3:00 to get the same day NAV & hence buying at lower price.

Disadvantages:

• Its the most costly channel. Even with abolition of entry load demat accounts like Reliance Money charges 2.25% for buying Mutual Fund.
• Not all schemes are offered by all demat accounts.

Through advisors/ banks etc

You have a financial advisor for you and you can buy from him directly. You just need to call him & he would collect the form & required documents from you.

Advantage:

• Easy process of investment.
• Good channel for people who are not net savvy.
• If you have a good finacial planner they advise you good schemes.

Disadvantages:

• Fee based system: You need to pay your advisor either an annual fee / viting fee or commission based fee.
• The advise may not be in your interest and he may advise you funds where he gets high commission. (unfortunately this is what happens most of the times)

Online through respective Mutual Fund Sites

This is a very good channel & I personally prefer this. But the problem is very few MF offers this facility. But then you can always find good achemes among them.

The process of investing online through MF sites is more or less similar for all MFs.

1. You can either download the form from their sites of fill it online (if they have the facility).
2. Fill up the form & attach your attested copy of PAN Card, bank cheque photocopy along with the payment cheque.
3. Fill up the PIN agreement form available on their website. This is necessary as you would need a PIN Number to log in to your MF account. 
4. Courier these filled forms & documents to respective MF adress, or subit it physically to their registrars - CAMS/KArvy.
5. In about 2 weeks you would receive the PIN number & wholla you are all set to invest online.

Advantage:

• You have all the advantage of Demat account here.
• No commission/ fee or hidden costs.

Disadvantages:

• the first investment should be in physical form. So you need to invest through your advisor/ or other physical channels to start with. 
• All Mutual Funds have different websites & different Pin numbers. So if you invest in large number of schemes tracking them would be difficult. Also you would need to remember multiple folio numbers and passwords.

List of Fund Houses offering Direct Online investments

• HDFC
• Reliance
• Principal
• Birla Sunlife
• ICICI Prudential
• TATA
• Quantum
• Morganstanley
• Kotak
• Franklin Tempelton
• UTI
• Fidelity
• Bharti AXA
• Mirae Asset
• SBI
• Sundaram BNP

You can find the link for all these MF Houses in my earlier post

Direct through Mutual Fund registrars - CAMS/Karvy

Here you need to dowload the form from respective MF site & fill it up. Attach photocopy of you PAN Card & submit it physically to the CAMS/Karvy office in your city. The registrar would attest your PAN card. So kee the orignal PAN Card with you if you are submitting an unattested PAN photocopy.

Advantage:

• Its a direct channel so no commssion whatsoever.

Disadvantages:

• You need to phsically go to office to submit. So not viable for everyone espicially in small towns. Every time you make an investment you need to fill up lenghty investment form. But if you invest in a fund which offers online invetment facility you can invest online subsequently.

For complete list of karvy/cams office & where you can submit your forms for different Mutual Funds visit: http://www.moneycontrol.com/easymf/order_forms/invest_easy.php

Direct to Mutual Fund Offices - by post/physically hading over

you need to follow the same process as in case of submitting to CAMS/Karvy. But if you post it you would not be sure which day NAV would apply to your purchase. NAV applicable to your investment is the day when the MF office receives your form & documents.

Advantage:

• Its a direct channel so no commssion whatsoever. 

Disadvantages:

• Every time you make an investment you need to fill up lenghty investment form.
• It may take 2 days for postal delivery so the purchase price remains uncertain. 

Dedicated websites which offers different mutual fund schemes at one place

http://www.fundsupermart.co.in

http://www.fundsindia.com/

This is the newest of all channels in India & so far the most convinient. I know of only these two sites which offer this service

you can choose any one by looking at their Mutual Fund Scheme coverage & other added services you desire. The process of opening an account is very similar for both of them.

1. You need to fill up an online form.
2. The filled up form is then emailed to you 
3. download the form from your email, take a print out, and sign at relevent places 
4. attach PAN Card, Bank Cheque photocopy, adress proof and a photograph along with KYC form and courier it to the adress provided.

Advantage:

• You get advantage of online investment just like demat account but without paying anything. 
• There are other value added services which too comes free of cost

Disadvantages:

• The cutoff time here is around 2:00 (in www.fundsindia.com) & 1:20 (in www.fundsupermart.co.in)  while if you go through direct online investment through MF sites it is 3:00. 

Note: For all kind of Online investment you need to have a bank account with online money transfer facilities.

Though this is the best channel so far personally I prefer www.fundsindia.com over www.fundsupermart.co.in because...

• Cutoff timing for equity funds is 1:20 in case of www.fundsupermart.co.in while 2:00 in www.fundsindia.com
• You cannot invest until you are KYC complaint through www.fundsupermart.co.in while you can invest upto Rs 50 thousand through www.fundsindia.com even without being KYC.
• www.fundsindia.com sends you prepaid courier and seems to have a better customer care. So you actually save your courier costs too.

Conclusion: Take any channel you feel convenient but you must invest in Mutual Funds to reach your goal of Financial Freedom!!!

Disclaimer: I do not endorse any product. All the opinions are my personal.