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Mutual funds buying process

Mutual funds are investments of capital collected from many investors into equity/debt by a fund manager. The investors hold units of the mutual fund, which they can cash in on later. There are all sorts of mutual funds offered by different asset management companies/mutual fund houses, each having its own risk/returns profile with varying exposure to equity/debt.

Key Points:

  1. Mutual funds are investments of capital collected from many investors into equity/debt by a fund manager.
  2. You only need to file your KYC (Know Your Customer) details with an asset management company or intermediary or with a central KYC registration agency.
  3. Determine how much you want from your investment at the end of the time period of investment. Plan investment accordingly to reach these goals. Invest in funds that match your risk appetite.

Don't invest all your money in a single fund. This puts you at great risk of losing your investment. Rather, diversify and invest in multiple funds.

What do you need to buy mutual funds?

You only need to file your KYC / FATCA (Know Your Customer & FATCA declaration) details with an asset management company or intermediary or with a central KYC registration agency. Conventionally, a demat and a trading account are opened before investing in mutual funds, as it is more convenient to hold and view all investments in one place and quickly transact in investments.

Getting Started

  • Identify and select a broker that provides access to mutual funds transactions.
  • Open a demat/trading account online with your broker.
  • Offline, you can fill up a form with a brokerage or at the asset management company's office.
  • At the time of registration, you have to submit the following:
    • Identity proof (Aadhaar ID, Voter ID, Driving licence etc)
    • Address proof
    • A cancelled cheque
    • Photograph
    • PAN card

Now you're all set to invest in mutual funds.

You can open a demat account at Upstox, an online trading platform that also allows you to buy best performing mutual funds from different asset management companies (AMCs) directly from its platform.

Selecting mutual funds to buy

You've successfully opened your mutual fund account and it's time to choose mutual funds that are worth buying. While buying mutual funds it is important to keep the following in mind:

  • Primary motive of the any investment is to get better returns.
  • Investment must be planned to reach financial goals.
  • Investments must be made in accordance with your risk appetite.
  • Design an investment strategy and build up a diverse portfolio.

Determine how much you want from your investment at the end of the time period of investment. Plan investment accordingly to reach these goals. Invest in funds that match your risk appetite. For example, equity oriented funds offer prospects of higher returns, albeit at an increased risk. If you are a conservative investor who can't take much risk, keep your exposure to such funds to a minimum. Don't invest all your money in a single fund. This puts you at great risk of losing your investment. Rather, diversify and invest in multiple funds. A time tested strategy is investing a major part of your money in relatively safer funds like large cap equity funds or debt, with a minor part going to well performing funds that can offer you greater returns at the cost of increased risk. This is called core-satellite investing strategy.

You can use custom criteria search tools to find suitable funds for you from all available funds at Value research online. Also, you can find a learn how to select the best mutual fund.

Buying mutual funds

Once you’ve opened your demat and trading accounts and decided which funds to buy, it's very easy to get started.

  • To buy online, just visit your broker’s website.
  • There is likely to be a dedicated mutual funds section for you to choose from. On Upstox’ website, you can access an exclusive mutual funds platform.
  • Just choose the mutual fund you want to buy.
  • Note that you should have funds in your trading account before you do this.
Wrapping up

  • Mutual funds are investments of funds pooled from multiple investors in equity/debt by a fund manager
  • To invest in mutual funds, you need to file KYC details online or offline
  • Invest to reach goals in accordance with your risk appetite
  • You can buy mutual funds directly from an asset management company (AMCs) or through brokerage houses.
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