Different ways of buying mutual funds

With collective efforts from various mutual fund intermediaries and financial planners, Association of Mutual Funds in India (AMFI) and Securities and Exchange Board of India (SEBI), people understand what mutual funds are and how they are beneficial. However, they are still not clear with respect to the different ways available to buy mutual funds. Therefore, in this article, let us discuss the different ways through with one can buy mutual funds.

Intermediaries

There are various kinds of mutual fund intermediaries available in the market. These include banks, stock brokers, corporate mutual fund distributors, individual mutual fund distributors, etc. To become any of the intermediaries, one has to be registered with AMFI. The list of these intermediaries can be traced from AMFI website. Intermediaries help you to have a smooth investment process in mutual funds. They would take care of the operations part on your behalf. This means that, they will bring the required application form, ask you for required documents and help you in filling that form (most of the time, they fill the form based on the documents provided by you). They also support you in terms of submitting the application forms, along with, supporting documents (including KYC) to the fund houses and also provide you with account statements as and when required.

Independent Financial Advisor

Independent Financial Advisor, popularly known as IFA, is an agent, who helps you in investing in mutual funds. Similar to intermediaries, IFAs too would help you in filling the application form and help you to submit the same, along with the supporting documents to the fund houses. However, IFAs along with taking care of the operations, also advice you on mutual funds and other products such as insurance, portfolio management services (PMS), loans and bonds, corporate fixed deposits (FDs), etc. For this, they receive commissions from the companies of which they are selling a product then may it be mutual funds or insurance or any other financial product. IFAs receive commissions as they invest in regular plans of mutual funds, expense ratio, which consists of IFA commissions. IFAs may also provide additional services like financial planning, portfolio advisory, etc. For this, they may charge you an upfront fee. Remember, they do carry a potential conflict of interest. Besides, not all IFAs work against your interest.

Asset Management Companies

If you don’t want any intermediary or IFA or a registered investment advisor (RIA) in between then, you may also invest in mutual funds directly by contacting the respective asset management companies (AMCs). You can even log on to their respective websites and also invest via their website to complete certain formalities as requested by AMC.

Online portals or apps

Apart from AMC websites, you may also use other online portals or various mobile applications, which would help you to invest through them. Generally, many of the online portals provide you regular plans. However, due to the strong efforts from SEBI, many big online portals and apps have started providing and promoting direct plans. These online portals and apps also gives you basic tools to do a bit of research before investing and also these days, they are providing certain basic financial planning tools through which, you may decide how much you need to invest and also be able to link those MF investments to a particular financial goal.