The mutual fund industry has undergone a massive transformation with the introduction of an option that will enable investors buy mutual funds online. In the face of strict competition by several mutual fund houses, innovation and transformation of conventional market practices are being viewed critically by mutual fund houses in order to attract a large influx of customers. Thus, investors are the winners in this monetary drama, with high-end deals being offered in order to win the hearts of prospective investors. In order to avoid dud deals and lose out on these attractive investment opportunities, it is critical to understand that buying mutual funds online involves the following precautions and safeguards. If you are a first time investor, it is highly important to approach the mutual fund house personally, in order to submit your application form. You can thus ask all investment-related queries and doubts to a representative of the fund house, in order to understand the mutual fund you are investing into. You must also download the scheme form from the respective website of the mutual fund house, accompanied with the your personal details, a copy of your PAN card, and the initial payment cheque, along with an application for a Personal Identification Number, that will be used towards your online transactions.
Once your are assigned a folio number, along with the Personal identification Number, all your subsequent transactions can be conducted online using your bank account. However, as an investor, you may have to go through the entire procedure in order to make an investment in other mutual fund houses. The KYC or the Know Your Client procedure is the only step that is not required to be repeated in such a scenario. This is done so as to simplify the online mutual fund transaction process, as handling various PIN numbers may make the online procedure time-consuming and cumbersome for the investor. If you are an investor who already possesses an online stock trading account, you can buy mutual funds via the same channel, provided that the broker offers such a facility for the purchase of mutual funds. Most large broker houses have ties with the Bombay Stock Exchange and the National Stock Exchange, providing a platform for mutual fund exchange programs for investors. The process is simple and less painstaking as it involves the following procedural requirements:
a) Firstly, you have to log on to your broker’s online trading terminal
b) You can exercise your choice and select a mutual fund scheme from the list of schemes available
c) If you aren’t happy with your list of schemes, then you also have the flexibility to place an order online
d) The units will finally be credited directly to your demat account
Ta-da, you are now the proud owner of mutual fund units purchased online!
Things to remember:
While the online system of transacting your mutual funds has eliminated a lot of your troubles, there are still some things that the online system cannot guarantee. The online portal will list out only those Mutual Funds who are good performers, not guaranteeing their performance in the future period. It is up to you as prudent investors to find out what can be the possible risks that you may be exposed to if you invested in a particular fund. Make sure that you have diversified your investments so that in the eventuality of a downfall, you are not primarily dependent on debts like personal loans or even a home loan to satisfy your financial requirements. With the help of your financial advisor ensure that you make the best use of your savings by investing in avenues where your profits are guaranteed, at least in the long term.