Mutual Funds – How to Invest?
Beginners to invest in mutual funds may find it a little complicated initially. Investment in Mutual Funds can be done in two ways either directly or through an independent financial advisor or mutual fund distributor or broker based on the medium of investment either via online or offline mode. One should note that having a PAN Card (Permanent Account Number) and complying with the KYC (know your customer) requirements are must to invest in mutual funds in India.
Direct Investment
Individuals can purchase mutual funds directly from the mutual fund houses without the need to pass through any middleman. In this case, one has to do the research part all on their own as they will not be getting any financial advice or assistance from any fund houses. One can buy mutual funds physically by visiting the office of the asset management company or by filling in the application form and mailing it with supporting documents or via online mode.
Financial Advisor
The Financial Advisor is a certified, professional expert who will identify the investor’s financial goal and helps an investor to build a financial blueprint based on the goals and recommend the correct investment options to match their objectives. One should understand as to how the advisor is paid and one is convenient with their recommendations. The financial advisor may charge a fee for providing his/her service to their clients.
Mutual Fund Brokers/ Agents/ Distributors
The mutual fund brokers or agents or distributors are the financial entities which usually recommends investors with investment products. One should always make a clear understanding of how they get paid for the investment and one should do their part of the research for meeting their financial and investment needs. Investors can transfer money to them directly or across the counter or by bank transfer. One should maintain an account with them to enable smooth transactions. Most of the brokers offer investment in multiple class assets apart from providing value-added services like risk profiling, financial planning and so on. One need not have to pay any additional fee for the services provided by the distributors as they get commissions directly from the mutual fund companies.
Online Portal
Several third-party portals are available online through which investors can invest. You can visit one of them and invest in a variety of mutual funds after payment of a nominal fee.
Key Takeaways from Mutual Funds
A mutual fund is a type of investment vehicle which consists of a portfolio of stocks, debt-based bonds and other securities.
A mutual fund gives small or individual investors access to diversify professionally managed portfolios at a low price.
They are divided into various categories each representing the kind of securities they invest in, their investment objectives and the types of returns they seek.
The mutual fund charges an annual fee which is known as expense ratios and in some cases, commissions which can affect their overall returns.
The majority portion of money in case of employer-sponsored retirement plans go to the mutual funds.
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