What are the different ways to invest in mutual funds?

A mutual fund is an investment vehicle that pools money from investors, such as you, to purchase securities. The corpus accumulated is then managed by a professional fund manager, who invests it in various financial instruments according to pre-determined investment objectives.

All you need to know about investing in mutual funds

As a mutual fund investor, you have the flexibility to choose different kinds of funds offered by different fund houses based on your budget, convenience and financial goals. As an investor, you can decide either to invest through a one-time lump sum payment or a Systematic Investment Plan (SIP).

Lump sum investment:

Through this method, investors accumulate savings over time and make a single lump sum payment to invest in one or more different types of mutual funds.

SIP:

SIPs, on the other hand, allow you to invest small amounts periodically in a mutual fund. For instance, if you want to invest ₹30,000 over a year, then you can set aside just ₹2500 every month to  invest consistently.

These are some benefits of SIP over lump sum

Rupee cost averaging

By investing a fixed amount frequently, SIP helps lower the cost of the investment. The units purchased when the markets were down, help compensate for the purchases when the markets are high, thereby averaging out the overall cost per unit. It takes away the pressure of timing the market .

Power of Compounding

If you continue investing in the SIP over a longer tenure you can benefit from the power of compounding. To benefit from power of compounding, it is imperative that you stay invested for a longer tenure.

Accessibility

Savings accumulated over some time could be used for other planned or unplanned expenditures. Through SIPs, investors can bring in the discipline to set aside funds to invest regularly irrespective of the amount. With a minimum investment of as low as ₹100 p.m. in certain, specific funds, SIPs are accessible to all classes of society.

How do you invest?

There are several methods available to invest in mutual funds. It can be done online as well as offline. Here are the different ways to invest in a mutual fund.

Offline

Directly through the fund house or RTA (Registrar and Transfer Agent)

You can invest in mutual funds by directly visiting the office of the fund house or RTA. The fund house or AMC will ask you to produce the application form and KYC form (If KYC procedure not completed). Fill the application/KYC (if applicable) form, provide necessary information i.e. name, address, PAN, email address, mobile number, etc. Attach copies of relevant documents and submit them along with a cheque or demand draft of the desired investment amount.

Through intermediaries

One can invest in mutual funds by contacting intermediaries, i.e., brokers, distribution companies, banks and independent financial advisors. These intermediaries must be registered with the Association of Mutual Funds of India or AMFI. Intermediaries provide you with all the required documents and help you in filling out the same. Online

Through your online account with your mutual fund distributor

If you wish to invest in mutual funds online, you need to open an account with authorized mutual fund distributors. It could be your stock broker as well. An online  account enables you to invest in mutual funds conveniently. You can sell and buy mutual funds, and manage the entire mutual fund portfolio through this account. The brokers offering these accounts typically list the details of the various fund houses along with different types of funds, fund managers’ details and reports highlighting the funds’ past performance, thus enabling you to make informed decisions.

They also enable you to set up standing instructions for SIPs.

Through websites and apps

These days, fund houses also offer online access to invest in mutual funds. You can either choose to download a mobile app or visit the website of the fund house. You are required to follow the instructions to complete the KYC process and verification online.

Final word:

Now that you know the ways to invest in mutual funds reach out to us at ICICIdirect to know more about how to choose the right mutual funds to invest for you. Also, open your 3 in 1 account with ICICIdirect in a few easy steps by clicking on the above link.