First let’s discuss about what actually Mutual Funds are?
Mutual Funds are a type of investment that pools money from many investors to invest in variety of assets like stocks, bonds and other securities.
Different Types of Mutual Funds:
- Open Ended Funds:- Where investors can buy and sell units at any time.
- Close Ended Funds:- Where investors can only buy units during the initial public offering and sell them on the stock exchange.
- Equity Funds:- Where investors invest in stocks and shares of companies.
- Debt Funds:- Where investors invest in fixed-income securities like bonds and treasury bills.
Advantages To Invest In Mutual Funds:
Diversification: Investments in mutual funds are diversified across sectors. This reduces the risks associated with investments.
Minimum Investment: Mutual funds require a low minimum investment. Thus, a wide range of investors can consider investing in different mutual fund schemes.
Liquidity: Open-ended mutual funds are a flexible investment option because investors can easily buy and sell. This implies that you can access the money whenever you need it.
Transparency: Mutual funds disclose their performance and portfolio of assets regularly. Thus, investors can easily track their investment returns.
Tax Benefits: Equity-linked savings Scheme mutual funds offer tax deductions under Section 80c of the Income Tax Act. Maturity Benefits are tax efficient and customer friendly as compared to other assets.
Convenience: You can opt for an investment plan such as a Systematic Investment Plan (SIP) where you can deposit in small amounts and promote savings.
How to Invest in Mutual Funds?
Before you invest in a mutual fund, whether offline or online, you must complete the KYC verification process by filling out the KYC form.
Here are the different ways you can invest in mutual funds:
AMC Website: You can invest in mutual funds online through the respective mutual fund website.
Offline: Complete an application form with a cheque or bank draft from the respective branch of the mutual fund or the Registrar and Transfer Agent (RTA).
Distributor: You can also approach a mutual fund distributor to invest in a fund scheme. The distributor must register with AMFI. Otherwise, you can also choose to invest directly without consulting any distributor.
Stock Exchange: You can purchase mutual fund schemes through MFSS and BSE, similar to purchasing company stock. However, investors must complete a one-time registration online with BSE or NSE to make this possible.
MF Utility: You can also invest in a mutual fund scheme online through MF Utilities Private Limited, a technology-oriented platform for mutual fund transactions.
Documents Required to Invest in Mutual Funds
While investing in mutual funds, providing the correct documents is essential. It will protect you from fraudulent activities and tax irregularities. Here are the documents you need to invest in mutual funds:
- Application form
- KYC-related documents that include your PAN card, passport-size photograph
- Proof of Address: Passport/Aadhaar/Passport/Ration card/Insurance bills/Bank account statement or passbook
- A blank cheque for SIP
- Third-party declaration for minors