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Basic things required for investment in mutual funds in India

  



Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions.

Basic information about mutual funds


Mutual funds allow a group of investors to pool their money together and taste a broader range of stocks or bonds than they could if they were trying them on their own. A mutual fund is an Investment vehicle that collects money from  various investor with similar financial goals. Investing wisely makes your money grow, helping you to meet your financial needs.


The money invested in mutual fund is utilized by a fund manager to purchase and trade in stocks (shares/equity) bonds(debt) and other securities as stated in the investment object of that scheme




The main benefits of investing in mutual funds


1. Easy to buy and sell
2. Investments can be made in lump sum or periodic payments
3. Mutual fund industry in India is very well regulated and transparent
4. Professional management saves time and costs.
5. Diversification helps to protect from downside risk
6. Rupee cost averaging helps profit from small regular investments


What things you require to start investing in mutual funds:


1. Permanent Account Number




 Permanent Account Number (PAN) is unique alphanumeric combination issued to all juristic entities identifiable under the Indian Income Tax Act 1961. It is issued by the Indian Income Tax Department under the supervision of the Central Board for Direct Taxes (CBDT) and is almost equivalent to a national identification number. It also serves as an important ID proof.
First things  make sure you have a PAN (Permanent Account Number) ; it's mandatory.
If not so first apply for Pan number,


Procedure for obtaining Permanent Account Number (Pan card)



2. KYC compliance
Make sure you get yourself  KYC compliant,how to do that follow this process


(If you are not kyc compliant, but you have pan number and also have relavant documents like proof of identity and proof of residance you can still go ahead with your mutual fund investment, but this time you have to submit your application form and Kyc form together to get started)


KYC requirements for a Mutual Fund Investor?





3. Bank account in your name

Bank account is must if you want to start investing in mutual funds.
 The investor must give his bank account number so as to avoid any fraudulent encashment of any cheque/draft issued by the mutual fund at a later date for the purpose of dividend or repurchase.

 
Fund Selection
The investors have the option of choosing between equity funds which bear little higher risk factors, balance funds which bear slight risk, debt funds which bear high risk. Cash Funds or short term floating rate funds do not bear any risk factor.


The several schemes of the mutual funds cater to different needs of the investors. A person who needs cash within a short time span may invest in cash fund. A short-term bond fund would be helpful for a person who expects a return on investment in 6 - 12 weeks. An equity fund or income fund is for a person who expects




The application form should be submitted along with cheque mentioning the amount to be invested and the cheque should be in favour of the scheme in which the investor wants to invest. Please check the important documents and process in this regard.


Important Documents and Processes.

"An investor must mention clearly his name, address, number of units applied for and such other information as required in the application form."


1. The Application Form is complete in all respects & signed by all applicants
2. Name, Address and Contact Details are mentioned in full.
3. Bank Account Details are entered completely and correctly. The 9 digit MICR Code of your bank is mentioned in the Application Form.
4. KYC Acknowledgement of All Applicants are submitted
5. Appropriate Investment Option is selected. If the Dividend Option is chosen, Dividend Payout or Re-investment and Dividend Frequency is indicated.
6. If units are applied for Jointly, Mode of Operation of account is indicated.
7. Your Investment Cheque / DD is drawn in favour of Scheme / Plan, dated and signed.
8. Please write the Application Number / Folio Number on the face of the cheque
9. A cancelled Cheque leaf of your Bank is enclosed in case your investment cheque is not from the same account. 
 Sip Calculator
 http://www.hdfcfund.com/Calculators/ContentDisplay.aspx?ArticleID=61EAE229-944D-43E5-8243-46E53BA8BA8B




4 comments:

  1. I want to invest in MFs by SIP. I would like to do it online..i've picked 2-3 schemes of different AMCs, how do i start ?

    ReplyDelete
  2. Hi Anonymous,

    Which Am'c your picked for your investment?
    In this link i mentioned as how to create online access for your franklin Templeton Investment.
    http://mutual-funds-personalfin.blogspot.in/2012/05/how-to-create-online-access-for-your.html

    Provie me names of mutual fund's which you have selected..

    ReplyDelete
  3. Your question is not clear to me.
    As per my understanding, you are new to mutual funds and want to start with mutual fund with low risk factor.

    Investing in mutual fund depend on many things like
    Your Goals
    Your current age
    Your Risk appetite


    With above information it’s difficult to suggest any things to you.
    For beginner, my suggestion is to start investing systematically in mutual funds.
    Start sip in diversified large cap mutual fund scheme with time horizon of 5-7 years.

    ReplyDelete
  4. Please check the main blog post, I had added image of Sip calculator.

    To achieve goal of one crore in next 10 years you need to save Rs. 43471 per month (if assuming rate of return from your investment is @12%) - which is difficult to achieve this goal as your annual income is one lakh now.

    But if you can able to give more time and religiously save Rs. 2861 per month for 30 years then you can able to achieve your goal of one crore.


    ReplyDelete

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