Investing online is simple, fast and convenient. Although most mutual funds allow you to invest online, the real experience comes alive on various investment portals. They allow you to buy, sell and monitor your investments online. A permanent account number (PAN) is the biggest requirement. Here’s how to invest in mutual funds online.

KYC compliance

It is mandatory to be compliant with know-your-client (KYC) norms. Many portals as well as fund houses allow you to do your KYC online, if you aren’t KYC-compliant already.

The Aadhaar-based e-KYC OTP method is completely paperless. Punch in your Virtual Aadhaar number (which you can generate on the UIDAI website), enter your PAN, mobile number and OTP sent to your mobile number, and you’re good to go. 

This method, though easy, comes with limitations. It allows you to invest only up to 50,000 per fund house each year. To invest more, you need to complete physical KYC (many portals arrange for pick-ups of forms by courier) or a biometric KYC. You need to verify your bank account and register your bank mandate. Different bank accounts and portals have different systems. For instance, Clearfunds.com and FundsIndia.com instantly deposit 1 in your bank account to verify your ownership of the same. You can register your bank mandate using Aadhaar-based online verification process as used for KYC.

Costs

All schemes offer direct and regular plans. Direct plans do not come embedded with distributor commission. Registered investment advisers are also mandated to offer direct plans if they charge a fee.

If you are investing through a portal, check the cost structure. Portals like Mutual Funds Utility, which the MF industry maintains jointly, allows distributors to route in their transactions as well as allow investors to invest directly. 

There are portals that offer you direct plans but charge a nominal fee per transaction; some of them also offer advisory services at extra costs. Others offer only distributor plans but then they usually offer a bundle of services.

Fund selection

You can buy funds directly based on your portal’s advice. These are typically called robo advisors; they do a basic risk profile, ask for your goals and suggest you a bunch of funds. Or, there are platforms where you can buy whatever you want; some offer direct plans, others offer regular plans. Check the costs.

Online platforms, though convenient, serve those investors the best who understand MFs. If you want handholding, stick to robo advisors.

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