How to Invest in online Mutual Funds?

How to Invest in online Mutual Funds?

People lookout for different ways to grow their money. These discrete methods of flourishing capital also come with contrasting risks. One chooses to invest their finances considering risks. It can be of any tenure. Moreover, it is often said that more peril is equally proportional to more returns. In many cases, it may hold, while in some cases, it fails.

It entirely depends upon several factors like the fund performance, the market, tenure, and others. Nonetheless, there are many ways of investing as well. For instance, direct investment in stocks, PPF, fixed deposit, recurring deposit, mutual funds, etc., are some methods. Here, we will discuss mutual funds.

What are mutual funds?

Mutual funds are the ways through which one can invest in diversified stocks, bonds, and securities. In a mutual fund, people invest money that is used to buy stocks, bonds, and securities from different companies. In mutual funds, all the shareholders lie equally. Loss in the fund means loss of all, while the gain in a fund is equivalent to profit for everyone.

It is more like a portfolio management consisting of different stocks. Thus, if you invest in a mutual fund, you are altogether investing in the part of the portfolio. Anyone investing in a mutual fund becomes a partial owner of that company. Therefore, if the mutual fund company gains, the investor will gain and vice versa.

Why should you invest in Mutual Funds?

Mutual funds are rather considered less risky than investing in stocks as mutual funds have diversified portfolios. It does not invest in only one stock, rather it invests in various stocks, bonds, and securities. For example, if you invested in the stocks of Microsoft and it did not perform well in the quarter, you might lose. If it performed well, you would gain. It will be dependent upon one stock only.

The market is unpredictable. Let’s say that you invested in ten stocks of different companies. Out of which, three companies did not perform well. But still, you will not lose much as you have seven other companies in your portfolio that performed well. It is where the mutual funds play their bona fide game. It creates a portfolio in a diversified manner where one can invest in multiply companies and suffer less loss even if some of them did not perform well.

Types of Mutual Funds

Depending upon the risk factors, tenure, and type of investment, mutual funds are also divided into some categories. Let us emphasize that for clearance.

1. Equity funds

Also known as stock funds, equity funds are one of the most used mutual funds. Here, the investment pool invests the money in stocks of different companies. The mutual fund company invests money such that the risk gets distributed. There will be a diversified portfolio of investment. It will be for a longer period with a high return factor. So, equity funds are suitable for investors that can without high risk for high returns.

2. Money market funds

Money market funds are also known as liquid funds. Here, the investor can invest their money, but they will not be bonded to a specific tenure. There will be no lock-in period for the money market fund. It is generally a low-risk plan. Money market funds are more or less equivalent to savings accounts. Here, the money will be invested in the cash market where the government along with banks and financial corporations issue money on different securities, bonds, etc.

3. Debt funds

The other name for debt funds is fixed income mutual funds. It is suitable for investors who are not willing to take many risks and want a fixed return on their investment. Debt funds invest the money to government securities, bonds, fixed maturity plans (FMPs), and many other fixed-income sources. Thus, it comes with low risk with a fixed interest rate and fixed maturity date.

4. Hybrid funds

Hybrid funds are also known as balanced funds create a balance between dividing the fund investment between debt fund and equity fund. They are comparatively low risky with moderate returns. The division between the two funds depends upon the changing market. The ratio of distribution can be either fixed or variable.

How to Invest in Mutual Funds in Detail?

Investing in mutual funds is not always a cakewalk. It is based on the market risks so no one gives you the surety of the returns. In many cases, people end up losing money because of choosing the wrong mutual fund. So, you can be prepared beforehand ad consider some of the crucial points in choosing a suitable mutual fund.

  • Set up a goal – Before investing anywhere, you need to have a clear vision of your expectations. You can make an investment goal before investing in a
  • Budgeting – After setting up the initial goals, you can start with planning your budget. It consists of your monthly income, expenses, and some savings from your side. Apart from that, you can use the leftover money for investing in mutual funds. Budgeting is an important step as you can be able to properly manage your living with it.
  • Update the necessary documents – You will need the documents like Aadhar card, PAN card, bank account details, etc., as a part of the investment process. It will be better if these documents are properly updated and handy with you. Thus, you can complete your online mutual fund investment in a few minutes.
  • Knowledge of funds – If you are new to a mutual fund, you also need to have prior knowledge of the funds available. As it depends upon the market, it can be a bit risky. Either you can take some time and check the types of mutual funds else you can skip this step if you know about the funds.
  • Check the risk factors – Mutual funds are categorized into risks starting from low and moderate and ending up to high risk. So, it will be better if you have prior knowledge of the risk factors that comes with the types of funds.
  • Choose the fund – Next step will be choosing the most suitable fund considering all the above factors. You can also choose multiple funds if you want to diversify your profile. It can also give you better results in return.
  • SIPs or Lumpsum – SIP refers to Systematic Investment plans where one can invest in mutual funds after every certain interval. The money will be deducted through your bank account after that interval. It is considered a better way of investment as SIPs provide the key benefits of rupee cost averaging and power of compounding. Apart from that, lumpsum can be a bit risky at times stock market is the apex.

Costs associated with investing in Mutual Funds

Everything comes with a price. If you want to achieve big, you need to pay big. Nevertheless, the mutual fund’s schemes have costs that can expense little. There are some funds with hidden charges. It is always better to go through the proper documentation before selecting any fund. Make sure to only trust the funds that have disclosed all their charges.

1. Entry fee – Entering into the world of mutual fund investments for the first time may cost you some penny. It is a one-time fee that you pay as an investor in a mutual fund scheme.

2. Exit fee – Whenever you try to withdraw the money within one year, there will be some costs associated with it. Most of the mutual fund schemes consider 1% on redemption value. However, this charge may vary. So, it is always better to go through the rules and regulations before choosing any scheme. The exit fee is levied on a mutual fund to stop the investor from withdrawing their money before its maturity. This fee had been proven successful as the investors draw out their decision of taking away the money.

3. Transaction fee – It is also a one-time cost associated with a mutual fund. The transaction fee also differs in different schemes. So, make sure to get aware of it beforehand. It is levied on both SIPs and lump sum investments. If you invest an amount less than 10,000, you might not experience any transaction fee. In case, an amount more than 10,000 might be associated with a 1%-2% fee.

4. Expense ratio – It is the fees associated with managing the fund. The expense ratio is always a negligible amount that the company charge for managing and running the scheme. It includes sales and marketing, distribution charges, fund manager’s charges, etc.

Ways to invest in online Mutual Funds

One of the most convenient investment methods is online mutual fund investment. Here, the fund houses have their website or application where you can create an account. Then, submit the necessary documents for verification. You can choose the mutual fund from surplus options available online.

Next, you can invest in a suitable fund. You can also choose the method of payment, tenure, the amount for investment, and the type of investment either SIP or lumpsum. Apart from these, you can keep track of the performance of the fund chosen. There will be a point of contact available on these websites which can assist you anytime. Since it is paperless and often takes less than 3 days to complete, it is preferred by most investors.

5 Simple Steps to Invest in Mutual Funds Online

  1. Visit the website and check mutual funds and create an account.
  2. Get aware of your risk capacity by clicking beforehand. It can be low, moderate, or high. Make sure that the higher the risk, the higher the return.
  3. Complete your e-KYC by uploading all the necessary documents. Wait for some time to get it verified.
  4. Choose the most-suitable fund with an investment goal.
  5. Read all the guidelines. If everything seems fine, do not take a second thought and invest in the mutual fund. Enjoy watching the money grow.


CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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