Mutual funds involve managing a large amount of money of various investors. One can put the funds in different companies with moderately low brokerage fees. Each investor can individually manage and look after their funds. Back in the day, investors were only able to buy and sell their funds through professionals like brokers and money managers. But now the time has changed, today online investment platforms have made things easier and more manageable. Anyone with a smart device ad a stable internet connection can buy and sell their funds. Let us know how to buy mutual funds online, but before, it is vital to understand few things about this investment.
- Purpose of investment
Before making major or even small investments, one must define their goals of investment or at least a clarity on the amount they wish to put in funds. It is important to make the portfolio more profitable by removing all possible risks.
- Fulfil the KYC requirements
Investors have to fulfil KYC guidelines if they wish to invest in a mutual fund. Copies of Permanent Account Number (PAN) card, Proof of Residence, age proof, and all the other important legal documents are vital.
- Research the available schemes
One must do thorough research of all the available schemes and options available in the market. After that, choose the one which matches your portfolio and tolerance level. It is best to seek the guidance of a financial advisor in case of any doubt.
- Consider the risk factors.
Risks are always associated with the investment. High returns come with high risks. One must calculate their tolerance level and then decide where to invest their capital accordingly.
Where to Buy Mutual Funds Online
The three basic websites or companies from where one can buy their funds online are:
- Investment Companies
The most common way is to buy funds directly from the investment companies that provide them as well as manage. They can be either publicly traded or private. The best thing about buying from these companies is that there is no commission fee. Almost all your invested money goes directly to the fund.
- Investment-Cum-Financial Services Companies
Some investment companies offer the investors an in-house account to trade their funds. These firms basically do this to push their proprietary funds, so investors have to pay additional fees or commissions.
The other option of investing is opening an online account at a brokerage. It is one of the most expensive with transaction fees, commission for each trade, and maintenance fees. But along that, it also provides greater exposure to the mutual fund market. One can easily find an account with low fees after combing out the discount brokerages.
Online Mutual Fund Account
After choosing where to invest, the next step to buying funds is setting up an online account. One can find this option at the website of their organisation. All the legal documents are necessary for opening an account.
One also has to tell the organisation whether they want distributions or have them reinvested in the firm. After all, this furnishes the account information to start with the initial capital. Applying online does not take more than 10 to 20 minutes. The application processing and funding of the account needs one to three days.
Online Mutual Fund Trade
After the account is actively buying and selling, funds are easily managed. Each site operates almost in the same way. Instead of buying stocks, one has to invest the capital. And set the dividend distributions management by using them to buy additional funds or have them reinvested.
After filling in all the details, the trade request stays pending till the fund’s daily value is calculated by the end of the trading day. It takes around one to three business days for the settlement of the trade. The time frame for all the individuals’ funds is posted on the site.
Choosing a Mutual Fund Online
Once all these steps are completed, the next thing is to decide what funds to buy, for this one has to do through research and calculate their risk tolerance. Generally, higher return is accompanied by greater risk factors. Those who have a low-risk appetite should try to stick to debt mutual funds. Generate your investment portfolio according to your needs and growth for a smoother investment.
Mutual Fund Expense Ratios
Before selecting the fund’s lookout for the types of fees and expenses that they need, sometimes the high costs overshadow the return offered. For indexed funds, seek out the cheapest ones as they tend to invest in securities of a certain index. Do well research to find the funds at the cheapest and profitable rates.
Mutual Fund Sales Charges
Apart from the annual expense charge, few funds impose sales charges (loads). It is basically a fee paid to the broker or investment advisor from whom you buy the funds. Load fees can either be charged at the time of investment or redemption. They tend to increase the expenses and out shadow the return. There can be many ways in which load is imposed on the investors, so it is important to read the terms of the funds carefully.
Why should one invest in Mutual Funds Online: Final Verdict?
The reason is very simple; the online process is very easy and manageable. It allows one to manage their fund on their own and help them track their progress. Above all, it is completely safe; all the trading is done directly through the bank account.
Mutual Funds provide higher interest when invested for a longer period. Above all, they provide some tax benefits too. So, if one wants to have their capital grow, they should definitely invest in mutual funds.