Moneycontrol
Nov 22, 2017 11:11 AM IST | Source: Moneycontrol.com

5 things you should ensure if you are a first-time investor in mutual funds

Though returns must be considered while investing in mutual fund, these factors matter a lot to ensure that your experience of mutual fund investing is smooth.

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The tribe of mutual fund investors is increasing. There are many first time investors who are willing to experiment with their money. For obvious reasons, most of these are focussed on choosing the best performing schemes. While you should choose schemes that cater to your investment needs, it is equally important to not ignore some of the operational elements, especially if you are a do-it yourself investor. Here are a few of them.

KYC: Mutual funds do ask for your identification, address and other details. You need a permanent account number (PAN) to invest in mutual funds. Aadhaar is also made mandatory to invest in mutual funds. Ensure that you have the right documents in place. You can invest in mutual funds only after completing your know your client (KYC) formalities.

You can check your status of KYC online by keying in your PAN. Also do check the fund houses have captured the KYC updates in your subsequent mutual fund account statements. If there is a discrepancy, you will have to take corrective action.

Bank account details: Invest using a bank account that you intend to continue with. Many times investors opt for their salary account in a hurry. But as they change job, they may find it difficult to continue with the old bank account. Though you can add another bank account to mutual fund folio, it is better to keep a separate account to handle all your investments to avoid unnecessary paperwork, given the high propensity to jump jobs.

Your saving bank account is the source of all your investments in mutual funds. While filling up the details in the application form, key in all the details such as account numbers, IFSC code along with other information carefully. While submitting the one time mandate be equally careful. A mistake here may make you redo the process again.

After you get your first statement of account, do go through the bank details for the accuracy.

Contact details: Get your email ids and mobile numbers right at the beginning. Mention a mobile number and email id that you intend to continue with. This may sound really stupid, but this is important.

An investor does not sign for an SIP everyday. Keep aside the initial enthusiasm, for many investors, they look at their investments once in a year. Worse, for some they just forget their investments. If you have got the communication lines open, the mutual funds will keep updating you about your investments.

Fund houses send an alert message about the 'SIP due'. This will help you to keep sufficient balance in your bank account. Transactions carried out are also communicated using SMS and email. You can reset your login-id and password if your mobile numbers and email are registered with the mutual fund.

NIGO- Before filling up your application form, read the instructions carefully. A minor looking error may force the fund house to reject your application. These errors include wrong choice of scheme options, non-compliance to amount thresholds, non-adherence to cheque writing norms. The list is  much longer. The mutual funds reject such applications on the grounds of ‘not in good order’ or ‘NIGO’ as they say in industry jargon. Check your form twice before submission using the checklist at the end of the application form.

Nominations: While filling up the form, do not ignore the nominations box. You can mention the name of the nominee and the share of your investments. You can appoint more than one nominee and state their shares. Please note that nominees come into the picture only after the death of the investor. Nominees can be changed by submitting a simple form afterwards.

Do not tick the ‘I do not want to appoint nominee’ checkbox, just to complete the form quickly. This extra time spent is worth it. Do nominate.
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