As an investor, there are many investment options which in most cases can be overwhelming. At times, you might become confused as to which investment to opt for. Mutual funds, Equities, Money Markets and much more are some of the options that you can chose from. Among these investment types, Mutual Funds have become popular in India in the last two decades.
Investment in mutual funds is one of the ways which you can diversify your investments without much stress. Many Indians have opted for Online Investment in Mutual Funds. Access to the internet is a major contributor to the surge of online mutual funds. the ease to which an investor can invest has encourages more companies to open online mutual funds investment opportunity.
WHAT ARE MUTUAL FUNDS?
A Mutual Fund is an investment option that pools money from shareholders to trade in diversified holding and is managed by a professional fund manager. This implies that while investors generate the money, a professional manager will manage the funds by investing it in securities.
WHAT IS ONLINE MUTUAL FUNDS
Online Mutual Funds is processed through Mutual funds investment company’s websites. These companies provide links with which you can easily log on to process your investment. Many people have embraced online mutual funds because of the ease and fast methods involved in its process.
LIST OF TOP ONLINE MUTUAL FUNDS
- Motilal Oswal Multicap 35 Fund
- SBI Bluechip Fund
- Mirae Asset Emerging Bluechip Fund
- L&T Tax Advantage Fund
- DSP BlackRock Equity Opportunities Fund
- Aditya Birla Sun Life Tax Relief 96
- ICICI Prudential Bluechip Fund
- ICICI Prudential Equity & Debt Fund
- L&T India Value Fund
HOW TO INVEST IN ONLINE MUTUAL FUNDS IN INDIA
One of the major concerns of internet users in India has been how to invest in Mutual Funds. We will provide you with the available options and the one which is suitable for you. You can invest in online Mutual Funds through:
- Agents and or Brokers: this has been the favourite way of investing in Mutual Funds in India. You will call the agent who will come to your doorstep and get you boarded by collecting the required documents, taking photos and submitting the completed forms to the Mutual Fund company he represents. You don’t have to bother about processing fees as the agent will earn directly from the mutual fund companies which will be reflected in your account statement. The more you remain in the investment, the more the agent gains.
- Mutual Fund Companies: all the mutual fund avails you with the option to invest directly. In this mode of investment, you will have to download the forms, complete it and submit the necessary document. Once the folio which is like your bank account is generated, then you can get on with the investment online.
- Online Portals: This service is provided by online portals like FundsIndia or Fundsupermart and is likened to purchasing an online term insurance. It allows you the convenience of online investment and you can review all investments in one page. However, these online portals collect commissions from online mutual fund companies. There is convenience and you can track your investments irrespective of the companies, but the cost is higher than Direct Plans.
- Online Demat Accounts: you can use your Demat Accounts to invest in online Mutual Funds. Demat accounts is used for trading on stock and holdings. The charges will be taken directly from your Demat account. Companies like ICICI Direct, Shrekhan offer this service and they receive commission from the mutual fund companies. It is online, but it is equally expensive like investing through online portals.
- CAMS or Karvy: They are middle men who undertake the responsibilities for processing and keeping records of your investment with the mutual fund companies. They are appointed by the companies. They offer online investments for certain companies where you follow the steps of downloading the forms and submitting the necessary documents online. They avail you the convenience of assessing your investments in one place.
- Banks: you will agree with me that banks can access your account and can persuade you to invest in mutual funds. They are mostly interested in making gains without bothering about your requirements.
- Direct Funds Providing online portals: they are the private players in the industry that offers direct plans online. One of them is Inestza.
GUIDELINES FOR INVESTING IN MUTUAL FUNDS
Investors in online mutual funds should have knowledge of regulations that governs the mutual fund sector in India.
The SEBI MF regulations of 1996 oversees the operations of mutual funds in the country. Mutual funds are treated as public trusts in accordance with the Indian Trust 1982 Act.
The guidelines are categorized into three which includes the fund managers, investors and representatives for accountability on the trustees.
WHAT IS SEBI?
SEBI is an acronym for Securities and Exchange Board a body designated to regulate financial investments in India. The major duty of the board is to protect the interest of the investors and regulate the activities of the operators in the securities market.
STTRUCTURE OF MUTUAL FUNDS ACCORDING TO SEBI GUIDELINES
- The guarantor is defined as one who is in partnership with an entity or entities creates a mutual fund.
- The guarantor will make revenue by pooling resources through mutual funds and engages the services of a financial manager.
- The sponsor is one who sets up mutual funds based on the provisions of the Public Trust Act.
- The sponsor is responsible for listing with SEBI after ensuring the funds will function in accordance with SEBI guidelines.
- The trust is established through a deed while implementation is carried out by the sponsors which must be accountable to the investors.
- The management of the funds is done through an Asset Management Company in accordance with the Companies Act of 1956.
CATEGORIES OF MUTUAL FUNDS ACCORDING TO SEBI GUIDELINES
To bring about uniformity in Mutual funds, the SEBI has introduced the following categories:
- Equity schemes
- Debt Schemes
- Hybrid Schemes
- Solution Oriented Schemes
- Other Schemes
This breakdown of mutual funds into different classes ensures that mutual funds can only have one scheme in each sub-category. This helps to make the selection of funds easier and to the interest of the investors by enlightening them on the risk factors that are available in each category.
This grouping of mutual funds will assist the investor in making the right decision as to which option is suitable for investment.
Key features of SEBI guidelines for Online Mutual Funds
- Classification of schemes into five units which are Equity, Hybrid, Solution, Debt, Oriented and others.
- Ensuring uniformity by clearly defining the large, mid and small caps.
- A lock in period has been clearly stated for solution schemes.
- Only one scheme is permitted for each group. The only exceptions are for Funds of Funds, Index Funds/Exchange Traded Funds and Sectorial/Thematic Funds.
SEBI GUIDELINE TO INVEST IN MUTUAL FUNDS
Below are the guidelines for investors in online mutual funds.
- Assessment of your financial position: being a diversified form of investment, it comes with a very high-risk factor. Investors must know their financial stand and can bear the risk in an event of a poor performing investment. Each investment scheme has its risk which as an investor you must know this.
- Get updated information on the mutual funds investment schemes: before you commit yourself to any investment, it is necessary that you obtain all the relevant information on that investment scheme. Being adequate informed on Mutual Fund options will help you to make good investment decisions.
- Diversify your portfolio: diversification of portfolio ensures that investors spread out their investments in various schemes which can increase their chances of making profits and decrease the possibility of losses. This is very important as long-term gains and financial sustainability can be achieved.
- Assign a time dimension to the investment schemes: if you assign a time frame for each of the schemes, it will improve the financial growth of the plan. This will help to contain any fluctuations or instability in the market.
IMPACT OF THE NEW CATEGORIZATION ON THE INVESTOR
The schemes are designed to favour the investors in these ways:
- A reduction in the number of schemes put out for investments will allow for the you to decide easily and quickly.
- There is the possibility that some schemes may become merged with others.
- Your expense ratio may dwindle because of a higher AUM for each of the schemes.
ADVANTAGES AND DISADVANTAGES OF ONLINE MUTUAL FUNDS TO INVESTOR
Mutual funds have its advantages and disadvantaged but it is one of the best investment options.
- There is increase in diversification as it holds many securities.
- Option of daily liquidity which allows investors to redeem their funds at the close of every trading day.
- Open and closed-end funds are managed by professional managers who oversee the investments.
- Ability to partake in investment irrespective of your place of residence.
- There is no barrier of distance or movement before investing in Mutual Funds.
- All Mutual Funds are expected to report to investors which makes it easier to know the highly performing funds.
Mutual Funds has its own disadvantages which includes:
- Little control over timing of recognition of gains
- Inability to predict income
- Lack of opportunity to customize
Mutual funds have become one of the most popular investment options currently practiced in India. The introduction of online portals for investment in mutual funds has introduced a new phase into the scheme. It is easy for an India to sit at the comforts of his home and make an informed investment decision. Online Mutual Funds offers the same benefits as investing offline. The only difference is the platform for investment. Many mutual fund companies are now embracing Online Mutual Funds because of the convenience it brings to both the company and the Investor.
With more awareness and internet penetration in India society, many people will become more inclined to investing in online Mutual Funds. The Securities and Exchange Board (SEBI) have put guidelines in place which will improve the confidence of the investor in the scheme. The regulations have helped to checkmate the activities of the fund managers as well as the companies.
Although Mutual Funds come with a very high risk, with more awareness many Indians will appreciate this high yielding investment option.