Investing in mutual funds is one of the simplest ways to build long-term wealth, but the first step often raises basic questions. What documents do you need? Should you invest directly with the fund house or go through a distributor? And how do commissions actually work?
If you are a first-time investor or someone looking to start afresh, this guide breaks down the process- from opening a mutual fund account and completing KYC to understanding direct versus regular plans-so you can begin your investment journey with clarity and confidence.
How do I start mutual fund investments? What are the key documents I need to have?
To invest in mutual funds, you'll need a permanent account number (PAN), address proof (passport, Aadhaar, or driving license), and a passport-sized photograph. If investing less than Rs 50,000, PAN isn't mandatory. You'll also need a bank account for transactions.
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Can I invest directly with the fund house or do I need a distributor?
Mutual funds have two plans: direct and regular. Regular plans involve investing through a distributor, while direct plans let you invest directly with the mutual fund, cutting out the intermediary. Direct plans generally have an expense ratio of upto 1 percent while regular plans have an expense ratio of upto 2 percent.
Do I need to pay a commission to my agent?
When investing through a distributor, their commission is deducted from the scheme's NAV, so it doesn't appear as a separate charge. You'll see it in your statements, though. If you work with a registered investment advisor, you'll pay them a fee for their services. To avoid commission charges, consider direct plans with the fund house.
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My fund house says I need to get my KYC done before investing. Now, I am already KYC compliant with my bank. Do I again need to go through the process again?
KYC is a mandatory process to verify your identity and address, preventing money laundering. With Aadhaar-based KYC, it's easier and faster, using an OTP to authenticate. This reduces paperwork and speeds up the process, making it simpler to start investing in mutual funds.
How much amount should I begin investing with?
You can start investing in mutual funds with as little as Rs 500, though minimum investment thresholds vary by scheme and systematic investment plans. Consider your target corpus, time horizon, and fund type when deciding your investment amount.
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