- Offline Method 2.Online Method
I. Offline Process:This is the traditional approach to investing in a mutual fund. This mainly relies on sub-brokers, agents, advisors to help out the investor make the right decision while choosing a scheme that's best suited for him/ her.
1. IFA'sIFA's or Independent Financial Advisers are professionals who offer their advice and views on the on financial matters to their clients, extending to mutual fund investments, too. They help you fill the application form and other formalities of the same. Thus, by involving them in the process, the IFA's could be considered a part of the expense ratio(Expense ratio: It is the percentage of assets deducted or the annual fee that all funds/ETF's charge their shareholders each fiscal year for fund expenses.)But this approach is slowly becoming obsolete as many distributors are implementing the new Robo-advisors, which would recommend the appropriate solution to their investment quandary. Ok, now that you've covered that portion, let's move on to another topic.
A) The Initial Setup:Here are a couple of things you need to go through before you get started. To start investing in a mutual fund scheme, you need a few things in check: PAN Card, bank account and be KYC (know your client) compliant. The bank account should be in your name with the MICR and IFSC details. These details are mentioned on your cheque page and it is common for a distributor/agent to ask for a cancelled bank cheque for verification. These two processes were quite simple, right? But what about the third one?
B) How do you get your KYC done?It's by the regulations of SEBI, in accordance with the 'Prevention of Money-laundering Act of 2002', that you need to be KYC compliant. KYC process is uniform across various SEBI regulated sectors in the securities market. Getting your KYC done weeds out duplication across these sectors and makes investing more friendly.
C) What are the documents required to be submitted for Offline KYC application?
- Passport size photograph
- As a Proof of identity, you can submit documents like a copy of PAN Card or Aadhaar or passport or voter ID or driving license.
- And as a Proof of address, passport or driving license or ration card or registered agreement of residence or latest bank statement or passbook or latest telephone bill or latest electricity bill or latest gas bill, not older than three months, will suffice.
D) Mutual fund Offline application form:You must have seen this phrase a couple of times on your TV screens, 'Please read all scheme related documents carefully before investing' So, what are these documents they talk about?
- Each mutual fund scheme has a form that investors need to fill. If you start investing in the SIP (systematic investment plan), you need to fill in two forms: one to open an account with the fund and the other to specify the SIP details such as Scheme Plan, Scheme option (growth, Dividend payout, dividend reinvest), frequency of the investing amount (monthly, quarterly, annually), and a separate row which specifies the Date on which the SIP sum is to be invested/ debited from the linked bank, along with the Total SIP Period.
- You need to submit your bank details with the Bank Name, IFSC Code, Account Number, Account type, etc.
- For the 1st payment, you may be asked to enter the Cheque Number, too.
- And for all future payments in installments, you may choose auto debit & bill-pay option. The amount gets deducted at the particular period and planted into the investment scheme. This is initiated by filling out the OTM form. You'll get to that part in a bit.
- Nowadays, you even find the option to Top-up the SIP amount gradually as time passes, either annually or quarterly. This may be percentage increment or actual value in rupees (usually in multiples of Rs.500 or Rs.1000). This too would be available on forms.
- And at the very end of the same form, you may find an OTM (One Time Debit Mandate Form). This is Applicable for SIP Registrations through NACH/DIRECT DEBIT. You need to mention the Folio Number, Application Number, Phone number, Email ID, Amount in Rupees, Period. There are rows available for the Signature requirements of the 1st Holder of Bank Account, 2nd Holder & 3rd Holder (only if you hold a joint account).
II. Online ProcessAMC'sWe live in an age where technology has a stronghold on every individual. It's quite natural for any individual to use the means of the internet to connect to different fund houses and start on their investments. Here are some ways to go about it via the online platform.
- AMFI website
- Applying through a Demat Account
- Web Portals/ sites
1. AMC'sYou can invest in a mutual fund scheme by investing directly through the AMC. You might have to visit AMC's office to make your investment (for the first time). Some AMC's may even succour you by sending an agent to help fill the application form, collect the cheque, etc. And then subsequently, you can choose to run investments in different fund schemes of the same AMC by the online way (of course, that is, if they do offer this service), or you can always opt for the offline way, which isn't the norm in this digital age.
2. AMFI websiteThe Association of Mutual Funds in India (AMFI) is a non-profit organization which monitors all the registered AMC's status. As of now, all the 42 AMC's that are registered with SEBI. All AMC's and intermediaries who assist in the investments have to be registered with the Association of Mutual Fund in India (AMFI), which also maintains an online directory on their website. You can avail tonnes of mutual funds related information here, ranging from mutual funds basics to the various products under the schemes. You can even locate the AMC's Branches, invest online in schemes, locate an agent in your area by just placing in the PIN code and the name of your city.
3. Applying through a Demat AccountIf you already own a dematerialized account (demat), you can buy and sell mutual funds schemes through this. But remember this, you might fall into commission here.
4. Web Portals/ sitesThere are many online intermediaries portals available which allow you to invest in Mutual funds. These include web portals of distribution companies, some stockbrokers, and a large number of small financial advisory companies. You can open an account with them, for which they might charge an initial fee, used mainly for seamless online operations and redemption of your investments. They might also send the necessary documents to your residence for it to be signed and formalized. Sites like rankmf.com are some of the portals like that.
5. BanksBanks are also intermediaries who deal in schemes of different AMC's. You can invest directly in the schemes at your bank branch. You could log-in to your bank page and fill out the required forms online to direct your funds to a suitable scheme, provided the bank facilitates such a process. You may even visit your nearest bank branch and confirm your tie-up with the fund houses that you want to invest in. Now that you've circled around the ways to invest in the funds. It's time to take a glance at the ways of setting up the account. So here is the set-up process.
A) The Initial Setup:In the Online Process as well, you need to follow the same steps as in an offline way. You need PAN Card, bank account and be KYC compliant. Of course, you might have to upload these mandatory documents online via their web terminal.
B) So what are the requirements for Online KYC application?Naturally, the online process also mandates KYC compliance. The online 'eKYC' process is, quite frankly, the path of least hassle. Here's a look at the modern way to complete KYC registration.
C) The eKYC Process:The eKYC is a process done through your Aadhaar number, which is then further matched with your PAN for further verification. If any of the documents are missing, the AMC may ask you to produce more documents. But here's the catch; through the eKYC process, your investment gets restricted to Rs 50,000 per year per Mutual Fund for OTP-based eKYC. However, if you want to increase the value of your investment amount, you need to go through proper KYC channels as discussed above, where, you have to submit the physical copy of the form with your signature on it. You might be called upon for an In-person verification or Biometric-based authentication by the AMC's. So, in a way, the process resembles the offline way, in terms of verification. Now that you've successfully managed to complete the KYC process, it's time to check if all procedures went by smoothly without any hiccups and the process is finalized.
D) How to check your KYC status?You can check their KYC status with your PAN number at any of the KYC Registration agency, irrespective of your mode of investment. For example, here are some site links to check 'em out. https://www.cvlkra.com/ https://camskra.com/ https://kra.ndml.in/ https://www.nsekra.com/ https://www.karvykra.com/
E) Mutual fund Online application form:It goes without saying that the online application form is the exact copy of the offline ones. Some distributors may allow the forms to filled online but the investor may need to print out the physical forms and deliver it to the service provider, either by courier or similar means. Some funds make it mandatory for the new clients to create login credentials to monitor and operate their investments. This involves setting-up of Usernames and login passwords. This enables the funds to offer their entire suite of services online. The next stages go something like this, but not necessarily in this manner.
- You may need to fill out the Investor Details. Then you may be asked to choose the Mode of holdings- 'Single' or 'Joint/Survivor'. If you go about choosing the 'Single' option, you need to fill out the individual details. This includes Holder Name, date of Birth, PAN number, Email, Aadhar Number, Country of Birth, Mobile number, Place of Birth. You may even find boxes to fill out Tax related details, ranging from 'Tax Resident Country', 'Tax Identification Number', etc.
- At the end of the page, you may find Nominee related inquiry, where you may place a nominee and allocate Nominee Percentage. You may even leave the option blank, in case you do not wish to nominate anyone in your stead.
- You may even have the checkboxes for 'Investment Preference' with the options for 'Financial Distributor' & 'Direct'
- Now comes the crucial part of selecting the scheme from the massive list available with the AMC or distributor. Once you have your mind set about a scheme, you need the check it and proceed to the next stage.
- In this stage, you'll fill out the details for the investment. It may include SIP Amount, SIP first installment date, SIP installment number, SIP end date, Frequency. You may even Step-up the SIP amount annually by a certain percentage amount or may enter the actual incremental value in rupees(in multiples of Rs.500 or Rs.1000)
- Once you finish this, you'll be directed to the confirmation page, where you may check & verify the details of your invested amount.
- Next comes the bank details, where you may provide a bank of your choice. This section may involve Bank name, Account number, Account type, IFSC Code, etc. Some AMC's/ Distributors may allow multiple modes of Payment for investors.
- For your current investments, you may choose Net banking, debit card, NEFT. And for future installments, you may choose, auto debit & bill-pay option.
- Now you've reached the final steps of the process, that is review & confirmation. You may edit the information that you wish to change before submitting.
- You'll finally be redirected to the payment gateway or banking website, depending on your payment mode. And once you complete the payment, you'll be directed back to the web portal where you'll see the confirmation of the transactions. This would be reflected in email or SMS; you may even print out the transaction statement from the page.