How does one start investing in mutual funds?

Mutual funds are becoming popular vehicles of investing. However, many still have questions regarding how to start. Please click on the link below to read my article on the subject:

How to start investing in mutual funds?

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The English translation of the same is as under:

Someone approached me the other day after an investment seminar and asked, “I understood the importance of mutual funds and that I must start investing. However, I do not know where to start and how. Can you please tell me, how do I invest in mutual funds?”

First of all, if you are starting to invest in mutual funds, or starting to invest altogether, it is better to take help from experts. There are two categories of experts that can be helpful, viz., mutual fund distributors and investment advisers. Both have differences in the way they conduct their business and help investors. However, for a beginner, both could be helpful.

Having said that, it helps to be prepared with the things required even before meeting an expert.

In order to invest in a mutual fund scheme, one must decide why one is investing – there has to be some financial goal – an expense in future for which one invests today’s surplus. The goal could be short term, medium term or long term. Once you know your goal, choosing the options becomes easy.

You must also decide whether you have a lump sum or regular saving to be invested. Mutual funds offer facilities for both.

In order to invest in any financial product, you must complete certain formalities. These are popularly known in the financial markets as KYC – Know Your Customer. This process involves submission of certain documents that prove your identity as well as your address proof. You would be given a confirmation once this is completed. In fact, the regulators have made life simpler for investors through a common KYC for any of the products in the securities markets, i.e. mutual funds, stocks or bonds. The experts that we talked about earlier – the mutual fund distributor or the investment advisor, can also help in completing your KYC.

Once your KYC is completed, you are ready to invest in mutual funds.

The next decision is whether you want to transact online or through an application form.

There are three main online platforms that one can use – MF Utility, NSE NMF II and BSE StarMF. Depending on which platform your mutual fund distributor uses, you can avail of the services. In all these cases, you need to set up your account. This process may take some time. You would not be allowed to transact before such registration.

Most mutual fund companies also offer online transaction facilities through their websites or through mobile apps. Your distributor also may have developed some such facility. Many mutual fund companies allow you to transact even without any registration if your KYC is completed.

Alternately, you can resort the age old practice of filling up an application form and submitting it to the designated offices.

Along with the application form, you would be required to make a payment. In the online mode, the payment would also be online. Hence, you would need to enable your net banking facility. Whereas if you are applying through an application form, you would need to attach a payment instrument along with the form.

Please make sure you are only making the payment from your own bank account, as mutual funds do not allow third party transactions.

So, as one can see, opening an account is a very easy process.

- Amit Trivedi, Author of "Riding The Roller Coaster - Lessons from financial market cycles we repeatedly forget. The book is available in English and Gujarati and is soon launching in Hindi.