How to invest in mutual fund directly is a big question popping up in the mind of a new investor.
Investing directly in mutual funds were allowed in India since January 2013. Since then, it has become the most preferred option of long-term investment via online mode. Apart from Banks, there are many discount brokers who can help to invest in mutual fund directly and save on brokerage commission. With the falling rates of PPF, people are investing more in mutual funds schemes. Currently, the rate of interest in PPF(Public Provident Fund) is 7.1% compounded annually while mutual fund schemes have an average annual rate of return of 12-15%.
Now the question is how to invest in mutual fund directly?
Select discount broker: The first step on how to invest in mutual funds directly is to select a discount broker in India. Below is the list of the top 5 discount brokers in India. They are called discount brokers because they have very minimal or no commission/brokerage charges and they mostly do not provide any investment advisory services. They have their own applications and websites from where you can invest in mutual fund schemes directly at the ease of your home. They have Dashboards to help you keep track of your asset allocation, profits earned on the amount invested, and the current value of your investments. They also help you to select the best performing mutual fund schemes based on 1year/3year/5year return on investment.
Brokerage charge for direct mutual fund is Rs 0
Charges Rs 10 for direct mutual fund schemes
Charges Rs 0 for direct mutual funds
Invest in direct mutual fund for free
Invest in direct mutual fund free of charges
Mobile Number and Email: The new investor will have to enter mobile number and email as prompted in the application. The mobile number can be verified by entering the OTP received on your phone. The email can be verified by clicking on the link received on your email id
Online KYC: The above fund houses give you the facility to do KYC from the comfort of your home. All you will have to do is to keep your PAN card and Aadhar card details ready for starting the verification process. You will be prompted step by step to enter details from your PAN card and Aadhar Card. Make sure your Aadhar Card is linked to your mobile number as you will receive an OTP during the verification process.
Bank Account: The next step would be to keep your Bank Passbook or Cancelled Cheque (your name printed on it) ready for the verification process. You will have to enter Bank Account details such as Account Holder Name, Bank Account Number, IFSC Code, etc. This Bank Account will be linked to your Demat account so that you can deposit or withdraw money from your Demat account to your saving bank account. Such deposits and withdrawals can be made by online Internet Banking or using your UPI ID linked to your savings Bank Account.
Uploading documents: In this step, you will be prompted to upload a copy of the canceled cheque/bank statement, specimen signature, copy of your pan card, and a passport size photo.
Terms and Conditions: Each discount broker will have terms and conditions which have to be digitally signed using Aadhar Number and OTP. This service is offered by NSDL( National Securities Depository Limited) an Indian central securities depository under the jurisdiction of the Securities and Exchange Board (SEBI), Government of India. So, this service can be considered a secured service because it is regulated by the Government of India.
Confirmation Mail: After successfully completing all of the above steps the investor will receive a confirmation mail in their registered email id. They will also share a digital copy of the documents signed in your registered email id. In order to login into the website or application, the discount broker typically generates a UserID and Password within 5-7 business days and shares it in your registered email id. In case of any queries, the discount broker will call you on your registered mobile number and guide you in solving the issue.
The modes of investing?
SIP (Systematic Investment Plan): If the investor wants to invest a fixed amount every month on any particular date in a mutual fund scheme, it is called a SIP. This SIP can be closed by contacting the stockbroker if the investor wants to discontinue the SIP. The amount that is already invested in the scheme will stay invested for any period of time until the investor withdraws the amount.
Lumpsum: If the investor wants to invest a variable amount on any day in a month in a mutual fund scheme then it is called a Lumpsum investment. In Lumpsum investment, it becomes flexible on the part of the investor to invest any amount as and when he/she wants. In this case, also, the investor will stay invested in the mutual fund scheme with the already invested amount for any period of time even if he/she discontinues further fresh investments.