Mutual funds can be a powerful vehicle for financial freedom. There are various websites, blogs and magazines dedicated to the same. But, do you know of different channels through which you can invest in Mutual Funds?
There are mainly 6 channels.
- Your Demat account
- Through advisers/banks, etc.
- Online through the respective mutual fund sites
- Direct through mutual fund registrars – CAMS/Karvy
- Direct to Mutual Fund Offices – by mail/physical delivery
- Dedicated Websites Offering Various Mutual Fund Schemes
We take a detailed look at the pros and cons along with the process for investing through each channel.
Demat account
The Demat account only makes sense for people who invest directly in the stock markets, so not everyone would have it.
Advantage:
- You can buy/redeem an MF with the click of a few buttons from the comfort of your home.
- You have a consolidated portfolio in one place. So it becomes easy to manage.
- Without the tedious process of filling out forms or submitting documents every time you buy MF.
- Invest instantly. Suppose the markets drop suddenly at 2:30, then you can invest before 3:00 to get the NAV for the same day and therefore buy at a lower price.
Disadvantages:
- It is the most expensive channel. Even with the abolition of the upfront charge, demat accounts like Reliance Money charge 2.25% for the purchase of mutual funds.
- Not all schemes are offered by all demat accounts.
Through advisers/banks, etc.
You have a financial advisor for you and you can buy directly from him. You just need to call him and he will collect the required form and documents from you.
Advantage:
- Easy investment process.
- Good channel for people who don’t know the network.
- If you have a good financial planner, they advise you good schemes.
Disadvantages:
- Fee-Based System: You must pay your advisor an annual fee/visit fee or a commission-based fee.
- The advice may not be of interest to you, and he may advise funds on which you get a high commission. (unfortunately this is what happens most of the time)
Online through the respective mutual fund sites
This is a very good channel and I personally prefer this one. But the problem is that very few MFs offer this service. But you can always find good schemes among them.
The online investment process through MF sites is more or less similar for all MFs.
- You can download the form from their sites or fill it out online (if they have the facility).
- Complete the form and attach your certified copy of the PAN Card, a photocopy of the bank check along with the payment check.
- Complete the PIN agreement form available on their website. This is necessary as you would need a PIN number to log into your MF account.
- Please mail these completed forms and documents to the respective MF address, or physically mail them to your registrars: CAMS/KArvy.
- In approximately 2 weeks, you will receive the PIN number and you will be ready to invest online.
Advantage:
- You have all the advantages of the Demat account here.
- No commissions/fees or hidden costs.
Disadvantages:
- The first investment must be in physical form. Therefore, you need to invest through your advisor or other physical channels to get started.
- All mutual funds have different websites and different PIN numbers. So if you invest in a large number of schemes, tracking them would be difficult. You will also need to remember several folio numbers and passwords.
List of fund houses that offer direct investments online
- HDFC
- dependence
- Important
- Swipe solar life
- ICICI prudential
- IDFC
- NATTY
- Quantum
- Morgan Stanley
- Kotak
- Franklin Tempelton
- AND YOU
- Fidelity
- Bharti AXA
- Mirae Active
- SBI
- Sundaram BNP
Direct through mutual fund registrars – CAMS/Karvy
Here you need to download the form from the respective MF site and fill it out. Attach a photocopy of your PAN card and physically send it to the CAMS/Karvy office in your city. The registrar would attest to your PAN card. So keep the original PAN card with you if you are sending an uncertified PAN photocopy.
Advantage:
- It is a direct channel so there is no commission.
Disadvantages:
- You need to physically go to the office to submit. Therefore, it is not feasible for everyone, especially in small towns. Every time you make an investment, you must complete a long investment form. But if you invest in a fund that offers online investment services, you can invest online later.
For a complete list of the karvy/cams office and where you can submit your forms for different mutual funds, visit: http://www.moneycontrol.com/easymf/order_forms/invest_easy.php
Direct to Mutual Fund Offices – by mail/physical delivery
You must follow the same process as in the case of sending to CAMS/Karvy. But if you post it, you won’t be sure which day the NAV will be applied to your purchase. The NAV applicable to your investment is the day the MF office receives your form and documents.
Advantage:
- It is a direct channel so there is no commission.
Disadvantages:
- Every time you make an investment, you must complete a long investment form.
- Postal delivery can take 2 days, so the purchase price remains uncertain.
Dedicated Websites Offering Different Mutual Fund Schemes at One Place
There are two websites that offer this service:
- backgroundsindia.com
- fundsupermart.co.in
This is the newest of all the channels in India and so far the most convenient. I only know of these two sites that offer this service.
You can choose any one by consulting the coverage of your Mutual Fund Plan and other additional services you want. The process of opening an account is very similar for both.
- You need to fill out an online form.
- The completed form is sent to you by email
- download the form from your email, print it out and sign in the relevant places
- Please attach the PAN card, the photocopy of the bank check, the proof of address and a photograph together with the KYC form and send it by courier to the address provided.
Advantage:
- You get advantages of investing online like a demat account but without paying anything.
- There are other value-added services that are also free.
Disadvantages:
- The cut-off time here is around 2:00 (at FundIndia) and 1:20 (at FundSupermart) while if you do direct investment online via MF sites, it is 3:00.
Note: For all types of online investment, you must have a bank account with online money transfer services.
Although this is the best channel so far personally, I prefer FundsIndia over FundsSuperMart because…
- The cut-off time for equity funds is 1:20 a.m. for FundsSuperMart, while 2:00 a.m. for FundsIndia
- You cannot invest until you have a KYC complaint through FundsSuperMart while you can invest up to Rs 50 lakhs through FundsIndia even without being KYC.
- FundsIndia sends you a prepaid courier and seems to have better customer support. So you also save your courier costs.
Bottom Line: Take any channel you see fit but you must invest in Mutual Funds to reach your goal of Financial Freedom!