Before knowing how to invest in a mutual fund, we must also know what is a mutual fund and how it works. When we know about what is a mutual fund and how it works, then it will be easy for us to know how we can invest in it.
What is a mutual fund?
In a mutual fund, the money of many investors is deposited in one place and from this fund, money is then invested in the market. Mutual fund is managed by asset management companies (AMC). Many mutual funds are available in Prateek AMC on rent.
Easy to manage
You can buy and sell any number of mutual funds on any day. Whereas you cannot buy bank FD, PPF, or insurance on government holidays or Sundays.
Many options
Mutual fund gives you the facility to buy many stocks and bonds with less investment. The money from the mutual fund you invest in is not invested in one place so if there is a recession in one sector, the profit can be taken in another sector.
Low fees
The mutual fund expense ratio is usually 1.5-2.5% of your investment. ER is the fee that you pay to the AMC for managing your fund. It is low because many people invest in one mutual fund and this fee is divided among everyone.
Transparency
Mutual funds are regulated by the Security Exchange Board of India (SEBI). And their NAV or price is announced daily. Unknown portfolios are also announced every month and various information about it is also given to the public.
How to invest in a mutual fund:
- Anyone can invest in a mutual fund by submitting a bid-filled application form along with a cheque or bank draft to the office of a mutual fund or designated investment service center (ISC) or the registrar and transfer agent of the concerned mutual fund.
- Anyone can also invest online through the website of the concerned mutual fund.
- Apart from this, one can invest with the help of a mutual fund broker registered with AMFI or choose to invest directly, that is, without involving or investing through any broker.
The mutual fund broker can be a person or a non-personal entity, such as a bank, broking house, or online selling provider.
KYC For Mutual Fund
Before investing in any mutual fund scheme, whether through online mode or traditional paper-based mode, the KYC process has to be completed by filling out the prescribed KYC form.
KYC means knowing your customer and this is a term used for customer identification process in a part room of the process of opening an account with any small entity.
KYC establishes the identity and address of an investor through relevant supporting documents such as photo ID and address proof. KYC compliance is mandatory under the Wealth Search Control Act 2002 and the rules made thereunder.