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You have understood how good Mutual Funds are, and you have made up your mind to start your investment journey. And now you are looking to pick the suitable mutual fund schems that will help you grow your money.
Now, different mutual fund categories take different levels of risk, aim for different rates of returns, and are suitable for different investment horizons. Therefore, your first step should be to be clear on specific aspects such as how long you want to invest, how much risk you want to take, and what kind of returns you want. Once you are clear about these aspects, it will help you zero in on the appropriate Mutual Fund scheme category.
Next, you need to pick suitable funds from within the category. To get a clear idea about all these aspects, you can read our article How To Choose Best Mutual Funds. It will help you in your research and guide you to find the appropriate mutual fund schemes.
After selecting the Mutual Fund schemes, the next step is to go ahead with the execution part and start investing. But how do you start your investment journey with Mutual Funds? In this article, we tell you about the key steps you need to take to start your investments, various options where you can do it, and also tell you about the easiest way to invest in mutual funds online.
The KYC or Know Your Customer process is mandatory at all financial institutions like banks, insurance companies, and mutual fund companies under the Prevention of Money Laundering Act (2002). This KYC process is simply a background check of anyone who wants to become a client of these financial institutions. The objective is to establish authenticity and ensure that the deposits or investments are made in the name of a real person. Also, KYC can help trace any spurious transactions.
Since mutual fund companies need to ensure that their clients are genuine, they ask for various documents from investors in the KYC process. So this process requires a lot of documentation such as ID card verification, bank account details, face verification, proof of address, etc. You can complete this process either offline or online.
There are primarily 2 ways to complete your mutual fund KYC through the offline mode. These two modes are through mutual fund company’s offices and through Registrar and Transfer agents (RTAs).
You can complete your offline KYC by personally visiting a mutual fund company’s office. They will give you a KYC form and ask for documents such as PAN Card, address proof, bank account details, signed canceled cheque, email id, phone number, self-attested photographs, etc. Fill the form and submit it along with the documents.
Pro tip - Make sure you visit a branch of mutual fund companies with qualified persons to do your in-person verification (IPV). Many small-town offices of mutual fund companies do not have such individuals there, so they cannot do your KYC.
Registrar and transfer agent (RTA) manages the back-end operation of multiple mutual fund companies. For instance, they manage day-to-day operations like purchase and redemption requests, KYC, etc. Since multiple fund houses tie up with one RTA for their back-end operations, it reduces their cost significantly.
You can complete your KYC offline by visiting the office of RTAs. CAMS and KFinTech are the two major RTAs that keep track of investors' transactions across fund houses in the mutual fund industry. Collect the KYC form from the RTA office. Fill it and submit it with attested photographs, ID proof, address proof, PAN card, and a canceled cheque.
Overall, completing your KYC offline is quite inconvenient as it includes hassles of taking printouts, photos, visiting the offices in-person, standing in line, etc. Not only that, the process can take a lot of time and may become a deterrent to your investment journey. An easier and much convenient way is completing your KYC online.
With innovations in technology, mutual fund KYC can now be completed entirely through the online mode. For instance, submitting documents online, e-signature, and uploading a video to replace in-person verification is a reality now.
As a result, completing KYC online has become a far more hassle-free experience than offline KYC. You can complete your mutual fund KYC in 2 ways. One, you can do it through the website of KYC Registration Agencies (KRAs), where you have to do all the paperwork on your own. The second option is to do it through ET Money.
KRAs are responsible for maintaining the KYC records of the investors centrally so that investors can invest in any of the mutual fund companies once they complete their KYC. Examples of such agencies are CDSL Ventures Ltd. (CVL) KRA, CAMS KRA, Karvy KRA, etc.
To complete your KYC, log on to the website of CVL KRA and create an account. Fill in all the details on the online form. Provide your registered mobile number, PAN Card, and other identification details. Upload self-attested documents online by following the instructions of the website. After completing the KYC process, you will get a KYC identification number that can be shared with your chosen investment platform to start your investment journey.
A simple, easy and fast option to complete your KYC is through the ET Money app. You can complete your KYC within a few minutes by uploading necessary documents from your phone. Be ready with the original copy of the PAN Card, original copy of address proof such as driving license, Aadhaar Card, Passport or Voter ID.
Here’s a step-by-step guide to complete your KYC:
Step 1 - Download the app on your mobile and login into the app. You can do it either by putting your email id or use Google sig-in option.
Step 2 - On the home screen, you will see the screen with different investment options. Click on Direct Mutual Funds and then choose any scheme you want to invest in.
Step 3 - To begin the KYC process, first enter your PAN card number and scan it.
Step 4 - Enter your personal details, including your name, nationality, etc., as per the PAN card.
Step 5 -. Next, you will need to add a bank account. Fill up details like bank account number, IFSC number, etc., to proceed further.
Step 6 - After confirmation of your bank account, you need to upload a photo of your original PAN card.
Step 7- Once you upload the PAN copy, enter your personal details, including your name, date of birth, gender, marital status, etc., as per the PAN card.
Step 8 - Select an address proof of any one of the following - Driving License, Aadhaar Card, Passport, or Voter ID. Click a clear picture of both the front and backside of the document and upload it.
Step 9- Next, click a selfie using your phone’s camera and upload it.
Step 10- After uploading your photo, upload a short selfie video. Make sure your face and Address Proof is visible while recording.
Step 11-The next step is your signature. You can sign on white paper and upload its photo or tap on the screen to sign.
After uploading your signature, you can review the uploaded documents. You can edit the uploaded documents if something is not clear. And you are done.
Your KYC will be completed within a few working days. If any of the document images are unclear, then you will receive a communication to upload a clear picture.
It takes about 3–5 working days to get your KYC verified as the verification is done by various government-certified agencies. In case you want to check your KYC status to start investing in mutual funds, here is how you can do it:
Once you complete your KYC, you can start investing in all the schemes of any mutual fund company. You don’t have to do different KYCs for different mutual fund companies. Here also, you can invest either through the offline mode or through the online mode.
In the offline mode, most avenues for investing in Mutual Funds give you only Regular plans of the schemes. These Regular Plans are expensive as the intermediaries through which you are investing are paid a commission by the Mutual Fund company.
To put it simply, when you invest in the Regular Plan of a mutual fund scheme, a part of your gains are taken and paid to the agent. On the other hand, if you invest in Direct Plans of a mutual fund scheme, there is no broker involved. Therefore no commission needs to be paid, and that means a lower expense ratio (the cost charged by mutual fund companies to manage your money). Usually, the difference between the returns of the Direct Plan and the Regular Plan of an equity fund remains around 1%. This 1% difference could become a considerable amount in the long-term.
A rough calculation shows that if you invest Rs. 6000 every month and the fund offers 15% annualised returns for the next 25 years, this 1% difference could grow to as much as Rs. 25 lakh. That sure is a lot of money. Read: What is the difference between Regular and Direct plans?
Apart from mutual fund distributors, banks, and NBFCs, you can invest in mutual funds through the offline mode by visiting the offices of RTAs like CAMS and Fintech, mutual fund companies, etc. Here are the details:
Banks and NBFCs - Various banks and Non-Banking Financial Companies also offer mutual fund schemes through the offline mode. You have to visit their office and contact a representative, commonly known as Relationship Manager (RM) to start your investment journey.
However, they invest your money in a ‘Regular Plan’ to earn a commission from your investments throughout your life. So, the RMs and agents could push you mutual fund schemes in which they will get a higher commission even if they are not suitable for you..
Mutual Fund Distributors - Another way to invest in mutual funds through offline mode is to contact an individual mutual fund distributor. However, just like bank RMs, your money will be invested in a ‘Regular Plan’ and the distributor will get a part of your returns as commission till you stay invested.
Registered Investment Advisors - You can also reach out to SEBI registered financial advisors in your area to invest in mutual funds through the offline mode. Through them, you invest in Direct Plans. But they will charge a fee. This fee can be either a certain pre-decided amount up to Rs. 1.25 lakh or up to 2.5% of your total investments.
RTA Offices - You can also invest in mutual funds through the offline mode by going to the office of SEBI registered RTAs like CAMS and KFintech. Both CAMS and KFintech serve a set of fund houses. So if you visit the office of CAMS, you will have to invest only in those fund houses served by them.
Mutual Fund Companies - You can also invest through the offline mode by going to the office of your mutual fund company in whose schemes you want to invest. The challenge is you have to do all the paperwork yourself. Not only that, if you want to invest in some of the best schemes across different mutual fund companies, you have to visit their offices separately.
Online investment will be less tedious and much faster than offline investment. Here are some options to invest online in mutual funds:
You can go to your selected fund house’s website and select the scheme you want to invest in.
This is the drill for most fund houses. But if you want to invest in 4 schemes of 4 different fund houses, you will have to log in to their websites separately each time.
A much simpler, easier and faster option is to invest through ET Money, as you can invest in all mutual funds schemes of your choice from one platform, track your total investments, and invest in the Direct Plan of mutual funds to earn better returns. You can also assess various parameters of a mutual fund scheme such as past returns, consistency, expense ratio, various other scheme details, and other schemes in that category to draw a comparison.
Here is a step-by-step guide:
Step 1 - Open your ET Money App and click on ‘Find Funds’ option to select the fund you wish to invest in
Step 2 - Now you will have the options of selecting mutual fund schemes based on asset classes such as Equity, Debt and Hybrid. If you have already finalized a scheme, you can directly look for that scheme in the search bar at the top.
Step 3 - Once you have selected the scheme, on the scheme page, tap on the ‘Invest Now’ button.
Step 4 - You will now have the option to either start an SIP or invest a lump sum amount. If you opt for the Monthly SIP option, then enter an investment amount, select monthly instalment date and select the SIP duration. Finally, click on the ‘Register SIP’ option at the bottom
Step 5 - That’s it Your SIP is registered. You will have an option to start your SIP instantly by making the first payment.
Since its inception, the Mutual Fund industry has constantly tried to become more investor-friendly. Earlier, the paperwork you needed to complete for mutual fund investments was a daunting task. In addition, you had to go through the trouble of physically going to an AMC or RTA office to complete your KYC. But now, all of these nuisances have been eliminated, thanks to the use of technology.
With online platforms like ET Money, you can complete your KYC and start investing without stepping out anywhere. Moreover, you can easily navigate through so many mutual fund scheme options and get to select your investment options in an easy-to-understand format.