Intermediate

There are two broad ways you can invest in mutual funds – directly or through an independent financial advisor/mutual fund distributor/ broker. You can also choose the medium to invest – online or offline (and both of these can be done through the distributor’s office or directly with the mutual fund company). In all cases, you will need to have a Permanent Account Number (PAN) and comply with the ‘Know Your Customer’ or KYC requirements.

Once the KYC requirements are completed, you can consider any of the following popular methods to invest:

- A financial advisor (FA) is a certified, professional expert who can help you to identify your financial goals, build a proper financial blueprint based on your goals, and recommend the correct investment options to match them. Make sure that you understand how the advisor is paid, and that you are comfortable with his or her recommendations. You may need to pay the advisor a retainer/advisory fee.

- Mutual fund distributors/ brokers/ agents are financial entities that you will already have a relationship with and who may recommend certain investment products to you. Once again, make sure that you understand how they are paid for your investment and that you have fully researched your own financial and investment needs. They can take your investment monies directly either via bank transfer or across the counter. Once you have opened an account with them, most of them offer investments in multiple asset classes (for instance, through a broker, you can invest in mutual funds, equity and debt) and have value-added services such as financial planning, risk profiling, etc. You may not need to pay the distributor or agent any additional fee as they earn directly through commissions given by the mutual fund companies.

- Direct investments: You can also buy directly from the mutual fund house without the need to pass through any intermediary or “middleman”. Please note, you will generally not receive any advice and will have to do research on your own. You can buy physically by visiting the asset management company’s office or filling in application forms and mailing them with supported documents, or you could simply choose to buy online. Most popular mutual fund companies today have websites where you could make any transactions.

Note: While investing, you may come across ‘Regular Plans’ and ‘Direct Plans’. Simply put, when you buy through an intermediary like an advisor or a distributor, you get units allotted under the Regular Plan. When you purchase directly without an intermediary being involved, you will get units under the ‘Direct plan’. Although the portfolio and corpus of the regular plan and direct plan are the exact same, the NAVs are different due to differing fund expense management ratios. When you invest directly, and not through an intermediary, you are not charged the commission payable to intermediaries from the fund house; to this extent, the NAV of the direct plan is higher than that of the regular plan.

What sort of documentation do I need to get started?

For investing in mutual funds, you need to complete a one-time ‘Know Your Customer’ (KYC) registration process by submitting the following documents:

• Filled-in KYC application form.
• Copy of photo identification document (any of the following: Aadhar card, driving licence, passport, voters identity card or identification card issued by government, public sector undertakings, professional bodies or colleges affiliated to universities).
• Copy of Permanent Account Number (PAN) card.
• Cancelled cheque.

Getting started: Other considerations

When you make your investment, you should also be clear about factors such as the following:

• Have you thought about the product being purchased in great detail- does it match your risk profile and requirements?
• How much money are you investing?
• Are you investing directly or via a distributor?
• Will it be a one-time lump sum investment or will you distribute your investment via a Systematic Investment Plans (automated, regular investments)? If it’s a SIP, how long will it be for and will you invest monthly/ quarterly or any other frequency?