Nowadays, index funds gained much more popularity over the years. g to the Association of Mutual Funds in India (AMFI) data, the Assets Under Management (AUM) of index funds stand at Rs 1.73 lakh crore in FY21-22, almost up by 197% as approximated to Rs 58,173 crore in FY20-21.
Even though the understanding and need for index funds have grown, many people mistake them for stocks and shares.
As per the index’s stock composition, investment Index funds in stocks are similar to mutual funds. Yet, unlike stocks, you do not require a Demat account to invest in index funds.
You can easily invest in index funds like any additional mutual funds. With the advancement of technology, there are numerous ways of funding mutual funds online and staying at the house.
Let’s discover how you can invest in index funds without a Demat account.
5 Myths Everybody Should Understand About Index Funds
- Index funds are Passive.
- One requires a Demat account investing in index funds
- All Index funds chasing the exact index have the same returns
- Index funds are risk-unrestricted investments
- as equity-oriented funds, Index funds are taxed
How To Invest In An Index Fund
Your investment in mutual funds through a direct or regular plan can be hectic; let’s try to understand the distinction between direct and regular plans.
- Direct plans do not charge distribution expenses or commissions
- Consequently, they have a lower expense ratio.
- However, when you buy a regular plan through a distributor, the mutual fund company pays a particular commission.
- Therefore, regular plans demand a higher expense percentage than direct plans.
If you want to buy index funds online or offline, you must choose which plan you want.
Few Options To Invest In Index Fund.
1. Investing Through AMC’s Website Or Office
- Many mutual fund companies say and advertise their products online.
- A visit to the fund house is sometimes necessary if the company demands it.
- In the fund house, an application form with a copy of the KYC documents, PAN card, and first cheque amount is submitted.
- A unique PIN and a folio number are allotted for further transactions.
- The only drawback is the repetition of the application process for every fund house that comes by you.
2. Independent Portals
- Different separate portals supply lists of mutual funds.
- For opening an online Demat account, Online registration is a must.
- Printout out the application form and submit the same form.
- The portal does the KYC(Know Your Customer) if not done before.
- Immediately login id is created. You can fast sell or buy your funds.
- The only problem is when the portal needs to be connected with the bank.
3. Through a Registered Mutual Fund Adviser
- Numerous mutual fund agents are registered with AMFI (Association of Mutual Funds in India).
- You can find the list of these mutual fun agents on the AMFI website.
- With the help of These agents, you may get further guidance via the different options at your home.
- These agents might sometimes submit forms on behalf of investors.
- The best way to find good agents is to filter them based on their knowledge, experience, and qualification.
- The main problem here is to find an active and experienced agent.
- Registered in AMFI, but inoperative agents can not help you to differentiate between beneficial and non-beneficial schemes.
4. Transfer Agents
- If you want to avoid visiting every AMC or finding the right advisor, you may invest your money through transfer agents.
- Transfer agents act as negotiators between the individual and the mutual fund company.
- Transfer agents do not demand any money or provide any information about new schemes and funds.
- They are like a one-point connection for presenting different forms.
5. Banks
- The most prevalent way of investing in mutual funds is via banks.
- Banks also act as mutual fund agents, and banks are the best to believe when you know which mutual fund to purchase.
6. MF Utility
- Another popular way of investing in index mutual funds is via the MF Utility forum.
- You can complete various mutual fund trades through the platform, including redemptions, investments, and switch transactions.
- MF Utility allows transacting your mutual funds from other AMCs through a solo platform and eliminates the need to open numerous accounts with different AMCs.
- However, the MF Utility platform is self-service, meaning you will not get any personalized investment guidance or advice.
Things To Check Before Investing In Index Funds
- Tracking Error: If an index fund has a lower tracking error, it indicates that fund performance is better.
- Risk category: Investors must ensure a good combination of index and busily managed funds in their acquisition portfolio.
- Investment objective: Investors consider their investment objective against the index fund scheme because Both are aligned to bring maximum benefits in the long term.
- Expense ratio: Although index funds have a far lower expense ratio than other mutual funds, index funds could vary. Investors are required to choose an index fund with a low expenditure ratio to maximise profits,
Easy way To Invest In Mutual Funds
- Easy to Register: You can register quickly and start your investment in an index fund within two working days (if your documents are proper).
- Invest from Anywhere: You can invest from anywhere in mutual funds in the world online.
- Paperless: The entire procedure of opening an account is paperless. Only genuine identification is needed even,
- Online In-Person Verification: You can verify online if you need to be KYC-compliant. (over a video call)
- Existing Portfolios: If you are a starter to investing in mutual funds, you can take advantage of existing portfolios of mutual funds to choose the best plan which suits you best.
Conclusion:
Index funds have different financing methods, but you must look for a more suitable path.
Some of the index fund options contain their boundaries. For example, when you invest straight in funds via AMCs, you have to develop separate IDs and passwords per AMC.
There are various Online platforms; you pick the most convenient option that offers you proper guidance and advice.
