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Photo by: Hemant Mishra/Mint
Photo by: Hemant Mishra/Mint

How to buy into a mutual fund scheme

You have done your research, you know what mutual fund to buy, you also have the money. But how exactly do you buy into a scheme? Here's how

1You can either fill a form or go online. If you go the physical way, then there are two forms; the common application form that captures your basic details such as address and bank account details, and a form to start a systematic investment plan (SIP). If you invest in a fund house for the first time, you need to fill the common application form to open your account. And then the SIP form, if you need to start a SIP. Subsequently, if you wish to invest a lumpsum, then you need to fill the ‘additional purchase’ form.

If you go online, you need to first open an account and fill in your details. The portal will determine if you are compliant with the current Know-Your-Customer (KYC) norms.

If you are investing through an online platform, you need to link your bank account by giving a cancelled cheque, and you are good to do. For investing through your fund house’s websites, you don’t need to submit any cancelled cheque.

2Once you are through with the first step of opening an account, the next step is to invest—which means applying for units of a mutual fund scheme. In this regard it is important to note some of the deadlines set. This is because units are allocated accordingly. If you invest in an equity or debt fund before 3pm, you get the same day’s net asset value (NAV). If you submit your application later than this, you will get units at the next day’s NAV.

However, do keep in mind that these rules apply only for applications below Rs2 lakh. If you wish to invest Rs2 lakh or more, you need to ensure that your money is there in the fund house’s account before the cut-off time, for all non-liquid funds.

If the amount has not been transferred, the cut-off timing rules will be applicable (and units alloted) according to the time when your amount gets deposited. For liquid funds, this rule is meant for all amounts, whether you invest Rs5,000 or Rs5 lakh.

3The process of investing doesn’t end with applying for the mutual fund units and making the investment. Keeping track of your money is also important.

So, check your account statement and keep an eye out for change of bank mandate. Once you complete the initial steps, keep a track of the account statement to check whether your investment, personal details and also scheme names and plans or options that you had chosen, are correct. Some fund houses send text messages to new investors, after their investment form gets processed, saying “change of bank mandate", when the new bank mandate is added. This is just a difference in nomenclature, but may cause concern if you do not know what it means.

A mutual fund account statement would list all the recent activities relating to your investments in funds. It gives you an instant snapshot of what all you did in your mutual fund account in the year that went by.

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