Chapter 4 of 15
How to Start Investing in Mutual Funds
KYC, platform selection, first investment — step by step.
Ramesh has been meaning to start investing in mutual funds for over a year, but every time he sits down to do it, he gets overwhelmed. KYC? PAN? Direct plan? Which platform should he use? The good news is that the process has been dramatically simplified over the last few years — you can be fully set up and making your first investment in under 30 minutes from your smartphone. This chapter walks you through exactly how.
Step 1: Complete Your KYC (Know Your Customer)
KYC is a one-time regulatory requirement mandated by SEBI for all mutual fund investors in India. Once your KYC is done, it is valid across all AMCs — you don't need to redo it for every fund house.
How to Complete KYC (Step-by-Step)
Gather documents: PAN card (mandatory), Aadhaar card (for e-KYC), a selfie or passport-size photo, and your bank account details (for linking).
Choose a KYC registration platform: You can do KYC through any SEBI-registered platform — Groww, Zerodha Coin, Paytm Money, CAMS MF Central, or KFintech. For direct investments, use the CAMS or KFintech portal directly.
Complete e-KYC via Aadhaar OTP: Enter your PAN and Aadhaar number. An OTP is sent to your Aadhaar-linked mobile number. Verify it — your name, date of birth, and address are automatically fetched from UIDAI.
Upload selfie or photo: Required for in-person verification (IPV). Most platforms use AI-based video KYC — you hold your PAN card and say a phrase on camera.
Link your bank account: Add your savings account (bank name, IFSC, account number). This is the account from which SIP debits will be made and to which redemptions will be credited.
Wait for KYC verification: Usually instant for e-KYC with Aadhaar. In some cases it takes 1–2 business days for a CKYC (Central KYC) record to be created.
You're ready to invest! Your KYC is valid across all AMCs and will not need to be redone unless you change your address or PAN details.
CAMS (Computer Age Management Services) is India's largest mutual fund registrar and transfer agent (RTA). Their portal MF Central (mfcentral.com) allows you to invest in Direct plans across ALL AMCs through a single platform — without going through any distributor, completely free. KFintech is the other major RTA. Both are SEBI-registered.
Step 2: Choose Direct Plan, Always
This is possibly the single most important decision in your investing journey. Every mutual fund exists in two versions: a Direct plan and a Regular plan. They invest in the exact same portfolio, with the exact same fund manager, but charge very different fees.
| Feature | Direct Plan | Regular Plan |
|---|---|---|
| Expense Ratio (typical equity fund) | ~0.5% p.a. | ~1.5–1.8% p.a. |
| Who invests | You directly (DIY) | Through a distributor/bank/agent |
| Fund Manager | Same | Same |
| Portfolio Holdings | Identical | Identical |
| NAV | Slightly higher (less fees deducted) | Slightly lower (more fees deducted) |
| Returns (long term) | Higher by ~1% p.a. | Lower by ~1% p.a. |
| Best for | Self-directed investors | Those who need advisor guidance |
Assume equity fund earns 12% CAGR on underlying portfolio:
- Direct Plan (net return after 0.5% expense = 11.5% CAGR):
- ₹5,000/month × 20 years at 11.5% = approximately ₹45.3 lakh
- Regular Plan (net return after 1.5% expense = 10.5% CAGR):
- ₹5,000/month × 20 years at 10.5% = approximately ₹38.2 lakh
- Difference = ₹7.1 lakh — money you lose to distributor commissions over 20 years
Total amount invested: ₹5,000 × 240 = ₹12 lakh. The extra ₹7.1 lakh is purely the compounding impact of the 1% expense ratio difference. This is why choosing Direct plan matters so much.
Platforms like Groww, Zerodha Coin, Paytm Money, ETMoney, and MF Central all offer Direct plans. When searching for a fund, always look for funds with "Direct" or "Dir" in their name, or check that the "Plan" field says "Direct". If a bank relationship manager offers you a fund, they will often default to the Regular plan — always ask explicitly for Direct.
Step 3: Choose the Right Investment Platform
| Platform | Type | Best For | Charges |
|---|---|---|---|
| Groww | App/Web | Beginners, simple UI, instant KYC | Free (Direct plans) |
| Zerodha Coin | App/Web | Existing Zerodha stock traders | Free (Direct plans) |
| CAMS MF Central | Web | Direct investment, no app dependency | Free (Direct plans) |
| KFintech myCAMS | App/Web | Portfolio consolidation across AMCs | Free (Direct plans) |
| Paytm Money | App | UPI-linked quick investments | Free (Direct plans) |
| AMC Direct Website | Web | Single AMC investing, e.g., SBI MF site | Free |
Step 4: SIP or Lumpsum for Your First Investment?
For most new investors, starting with a SIP is recommended. A Systematic Investment Plan allows you to invest a fixed amount every month automatically. This removes the anxiety of "timing the market" and builds the habit of regular investing.
Lumpsum investing — putting in a large amount at once — is better suited for experienced investors who have idle funds and want to deploy at specific market levels, or for short-duration debt funds where timing has less impact.
Minimum SIP amounts have become very accessible:
- Most funds: ₹500/month minimum SIP
- Some funds (e.g., Parag Parikh Flexi Cap): ₹1,000/month
- Certain AMCs offer micro-SIPs starting at ₹100/month
Ramesh, 35, wants to start investing for retirement 25 years away. Here's his simple plan:
- He opens Groww, completes e-KYC in 15 minutes using PAN + Aadhaar OTP.
- He searches for "Mirae Asset Large Cap Fund" — selects the Direct - Growth option.
- He sets up a SIP for ₹3,000/month on the 5th of every month (salary credit day + 2).
- He links his HDFC Bank account via net banking mandate (one-time setup).
- Every month, ₹3,000 is auto-debited and invested — Ramesh doesn't need to do anything.
If this SIP earns 12% CAGR over 25 years, Ramesh's corpus will be approximately ₹57.9 lakh on a total investment of ₹9 lakh. That's the magic of long-term compounding.
to calculate how much your monthly investments could grow over time.
What is the key difference between a Direct plan and a Regular plan of the same mutual fund?
Key Takeaways
- KYC is a one-time process required by SEBI — complete it via Aadhaar e-KYC on any platform like Groww, Zerodha Coin, or CAMS MF Central in under 30 minutes.
- Always choose the Direct plan over the Regular plan — the expense ratio difference of ~1% compounds to lakhs of rupees over a 20-year investment horizon.
- SIP is the recommended starting method for most investors — it removes market-timing anxiety, invests automatically, and builds disciplined saving habits.
- You can start SIPs with as little as ₹500/month — there is no reason to wait for a "large enough" amount before you begin.