How To Buy Mutual Funds Online & What to Consider before the Purchase?

Posted on Wednesday, May 4th, 2022 | By IndusInd Bank

Mutual funds are pooled investment instruments that take in money from many retail investors, create a fund out of it, and invest that fund in assets such as equity, debt, or a mix of both. This gives retail investors the benefit of professional money management, diversification, and higher returns.

But how do you actually go about investing in a mutual fund? And what factors do you need to consider before purchasing one? This article sheds some light on these important questions.

Types of mutual funds

The first thing to understand before investing in a mutual fund scheme is the different types of mutual funds that are available in the market and which one is the best fit for you based on your financial goals.

There are a few different ways in which mutual funds can be categorized. Based on the asset class that the fund invests in, mutual funds can be of the following types:

Equity mutual funds:

Equity funds or growth funds focus on long-term wealth creation. These funds invest in stocks of listed companies and as equity has a higher risk compared to other types of mutual funds. Equity funds are great for people looking to invest for the long-term in order to earn higher returns.

Debt mutual funds:

Debt funds invest in fixed income instruments such as government bonds, corporate bonds, debentures, etc. As these funds invest in fixed income instruments, they generate regular income for their clients with the aim of capital preservation in mind. So, these are less risky as compared to equity mutual funds and are a great way of creating a supplemental income stream while earning higher returns than FDs.

Balanced funds:

Balanced funds invest in a mix of both equity and debt. Balanced funds come in many different compositions of equity and debt and investors can choose the one based on their risk profiles.

Apart from these, there are a few other important types of mutual funds as well that one must be aware of. These are:

Tax saving mutual funds or ELSS funds:

ELSS funds can be either equity, debt, or balanced funds that can help you save taxes. The contributions made towards these funds are tax deductible under Section 80C of the income tax act. The catch here is that they come with a lock-in period of 3 years, which means you can’t make any withdrawals for 3 years.

Closed ended and open ended funds:

This is a very important distinction to understand when investing in mutual funds. Close ended funds are funds that issue only a fixed number of units. This means that once the scheme starts, it doesn’t allow any new investments. It also means that investors can’t exit the scheme before it ends, which means these schemes are not very liquid. Open ended funds are more flexible and allow money to be invested or withdrawn easily.

How to invest in mutual funds online?

After you have decided on the type of fund you wish to invest in based on your financial goals, you can apply for it online in the following ways:

Through the fund house directly

The first way to apply for a mutual fund is to purchase one directly from the fund house managing the fund. All have to do is visit the website of a fund house, browse through the multiple schemes provided, and apply for the one that suits your needs. You will need to complete a KYC form, provide some personal information, and provide your PAN and Aadhar cards. Once everything checks out, you can start investing.

Through wealth management services

Another easier option that you have is to get the help of wealth management services. IndusSmart is a smart way of investing in your desired products. The online Wealth Management Portal enables you to invest in Mutual Fund Schemes as well as SIPs via mobile and Internet Banking. In addition to investing online, you can also plan your investment to meet your financial goals or you can also learn about investing in mutual funds.

Other factors to consider

Now that you know the types of mutual funds available and how to apply for one online, there are a few other important factors that you should always consider before investing in a mutual fund scheme. These are the following:

• Keep your financial goals in mind and don’t take too much risk
• You can invest in mutual funds in two ways: a single lump-sum payment or a systematic investment plan (SIP), which involves monthly payments. For most people, SIPs are great as they are flexible and they let you average out your cost of buying the units in the fund.
• Another important thing to consider is taxes. Any capital gains from mutual funds are taxed at regular short-term and long-term capital gains tax rates. So, keep this thing in mind when going for a mutual fund investment

If you are looking to invest in IndusInd Bank mutual funds, do click here.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.