How Can I Invest in Mutual Funds in India?

How Can I Invest in Mutual Funds in India

An investment in mutual funds can be made both offline and online. The following is the process for investing in a mutual fund scheme:

Step 1: If you are investing through the offline mode, you can visit either an asset management company (AMC) branch, the nearby Karvy/CAMS office or a registered mutual fund distributor/broker. If you want to go via the online mode, you can visit the website of either an AMC (for both direct and regular mutual fund schemes) but the option of funds available to you will be limited. Alternately you can log on to the website of a registered mutual fund distributor such as Paisabazaar and invest in leading mutual funds in India across top fund houses.   

Step 2: After this, you need to complete the KYC (Know Your Customer) formalities as per SEBI guidelines.

Step 3: The next step is completion of In-Person Verification (IPV). IPV can be completed by either by visiting the nearby Karvy/CAMS office etc. or sending documents in paper/applicable digital format to the registered mutual fund intermediary.

Step 4: Select a mutual fund scheme on the basis of your investment time horizon, risk appetite, and other important factors. You can read more about how to select a mutual fund scheme here.

Step 5: Submit the mutual fund application form. This can be done after the completion of the IPV which usually takes 5-7 days. Along the application form, also submit the investment cheque amount. If you wish to invest via a SIP (Systematic Investment Plan), fill and submit the SIP form along with the application.

Types of mutual funds

Various types of Mutual Funds exist to cater to different needs of different people. Largely, they are of three types.

1. Equity or Growth Funds

• These invest predominantly in equities i.e. shares of companies
• The primary objective is wealth creation or capital appreciation.
• They have the potential to generate higher return and are best for long term investments.
• Examples would be
  • “Large Cap” funds which invest predominantly in companies that run large established business
  • “Mid Cap” funds which invest in mid-sized companies.
  • “Small Cap” funds that invest in small sized companies
  • “Multi Cap” funds that invest in a mix of large, mid and small sized companies.
  • “Sector” funds that invest in companies that are related to one type of business. For e.g. Technology funds that invest only in technology companies
  • “Thematic” funds that invest in a common theme. For e.g. Infrastructure funds that invest in companies that will benefit from the growth in the infrastructure segment
  • Tax-Saving Funds

2. Income or Bond or Fixed Income Funds

• These invest in Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.
• These are relatively safer investments and are suitable for Income Generation.
• Examples would be Liquid, Short Term, Floating Rate, Corporate Debt, Dynamic Bond, Gilt Funds, etc.

3. Hybrid Funds

• These invest in both Equities and Fixed Income, thus offering the best of both, Growth Potential as well as Income Generation.
• Examples would be Aggressive Balanced Funds, Conservative Balanced Funds, Pension Plans, Child Plans and Monthly Income Plans, etc.