A Beginner's Guide To Investing In Kotak Mutual Funds

Investing in mutual funds is a popular option for investors in India and across the globe. Mutual funds are investment vehicles that pool money from investors, which is then invested in a wide variety of assets, such as stocks, bonds, gold, etc., depending on the investment objective. One of the major asset management companies in India is Kotak Mutual Fund, which offers investors over 84 mutual fund schemes, including equity schemes, debt schemes, hybrid schemes, and more. In this article, we will discuss how to invest in mutual funds with Kotak, the types of mutual funds offered by the company, and the benefits and risks of investing in mutual funds. We will also provide a step-by-step guide on investing in Kotak Mutual Funds and highlight some of the top-performing funds offered by the company.

Investment Account Types

Kotak Mahindra Bank offers a wide range of investment accounts to cater to diverse customer needs. Here is an overview of the different types of investment accounts available:

Savings Accounts:

• Senior Citizen Savings Account: Tailored for senior citizens, offering convenience and benefits such as higher interest rates and tax advantages.
• ActivMoney Savings Account: An account that provides easy access to funds and the ability to earn higher interest by maintaining a higher balance.
• Everyday Savings Account: A basic savings account for everyday banking needs, offering features like ATM withdrawals and deposits.
• 811 Zero Balance Account: A zero-balance savings account with no minimum balance requirements.
• Silk Womens Savings Account: A savings account designed specifically for women, offering exclusive benefits and features.

Current Accounts:

• ActivMoney Current Account: A current account that provides easy access to funds and seamless transaction capabilities.
• Startup Premium Current Account: Designed for startups and small businesses, offering benefits such as low fees and easy transactions.
• Startup Regular Current Account: A basic current account for startups with essential features to manage their finances.
• Astra 15 Current Account: Offering benefits such as higher transaction limits and priority banking services.

Salary Accounts:

• NationBuilders Salary Account: An account designed for salaried individuals, offering features like higher interest rates and exclusive benefits.
• Corporate Salary Privy League Programme: Tailored for corporate employees, providing exclusive benefits and priority banking services.

Mutual Fund Investment Accounts:

• Kotak Mutual Fund Investment Account: Allows customers to invest in a variety of mutual fund schemes offered by Kotak Mahindra Mutual Fund, one of the largest fund houses in India.
• ET Money Platform: A direct investment platform that enables customers to invest in various mutual fund schemes, track their investments, and avoid additional brokerage charges.

Investment Schemes:

• Tax Saving Fixed Deposit: A fixed deposit scheme with tax benefits, ideal for customers looking for safe and tax-efficient investment options.
• National Pension System (NPS): A pension scheme that allows individuals to build a retirement corpus over time, offering market-linked returns and tax benefits.
• Sovereign Gold Bonds: Offering customers an opportunity to invest in gold without the need for physical storage, with the potential for capital appreciation and periodic interest income.
• Equity Mutual Funds: Kotak offers a range of equity mutual funds, including large-cap, large and mid-cap, mid-cap, and small-cap funds, providing investors with diverse options to suit their risk appetite and financial goals.
• Debt Mutual Funds: For more risk-averse investors, Kotak provides debt mutual funds that invest in fixed-income instruments, offering stable returns with lower risk.
• Hybrid Mutual Funds: These funds invest in a combination of equity and debt instruments, providing a balanced approach to investing.

Each investment account type serves a specific purpose and caters to different customer needs. It is important for individuals to carefully consider their financial goals, risk appetite, and investment horizon before choosing the most suitable investment account for their requirements.

KYC Requirements

KYC stands for Know Your Customer, and this process is mandatory for mutual fund investments in India to prevent money laundering. The documents for KYC include proof of address and proof of identity. Here is a list of officially valid documents (OVD) that are admissible:

• PAN Card (Mandatory)
• Any other valid identity card issued by Central or State Government
• Bank account statement or bank passbook
• Utility bills like electricity or gas bills

While these are some of the standard document requirements, submitting all of these documents can be a tedious process. ET Money offers a paperless and fast solution. You can submit your KYC in under two minutes by uploading photos of your identity and address proofs, including PAN and any one of Aadhaar, Voter ID, Driving License, and Passport, along with your signature, a selfie, and a live video for identity authentication. It takes about 3-5 working days to get your KYC verified as the verification is done by government-certified agencies.

Additionally, before investing in a mutual fund, investors must also complete the KYC procedure, which entails submitting the required identity papers and personal information.

Investment Options

Kotak Mahindra Mutual Fund is one of the largest asset management companies in India, with over 84 mutual fund schemes for investors. The fund house has over 8.1 million investor accounts and over 50,000 impaneled distributors.

• Kotak Flexicap Fund: This fund has offered 16.48% annualised returns over three years and 20.03% over five years. The minimum investment amount is ₹100 via lump sum and ₹100 via SIP.
• Kotak Emerging Equity Fund: With 23.84% annualised returns over three years and 31% over five years, this fund has been a strong performer. The minimum investment amount is ₹100 via lump sum and ₹100 via SIP.
• Kotak Small Cap Fund: This fund has delivered impressive returns of 21.37% annualised over three years and 34.91% over five years. The minimum investment amount is ₹100 via lump sum and ₹100 via SIP.
• Kotak ELSS Tax Saver Fund: Offering tax benefits and solid returns, this fund has provided 19.89% annualised returns over three years and 24.04% over five years. The minimum investment amount is ₹500 via lump sum and ₹500 via SIP.
• Kotak India EQ Contra Fund: With consistent performance, this fund has achieved 23.12% annualised returns over three years and 25.87% over five years. The minimum investment amount is ₹100 via lump sum and ₹100 via SIP.

You can invest in Kotak Mutual Fund schemes through the company's website, a distributor, or a direct investment platform like ET Money, which offers a seamless and cost-effective way to invest in various mutual fund schemes.

When considering investment options, it's important to evaluate your financial goals, risk appetite, and time horizon, and the fund's performance, fees, and portfolio composition.

Investment Strategies

Investing in mutual funds in India may be done using some of the following investment techniques:

• Establish a Diversified and Stable Portfolio: Many mutual funds invest directly in blue-chip companies and specialised sectors like banking and real estate. Depending on your needs, several mutual funds may provide a blend of equity and debt funds to give you more options. An investor chooses the appropriate mix and profiles in order to get valuable and profitable returns. An investor who wishes to invest in one or two equity funds must diversify across a variety of industries and asset classes in order to build a strong portfolio.
• Be clear about your investment goals: Investors should be certain of their investment objectives prior to investing in mutual funds. A little investment of RS 500 might be used by an investor today to launch one of the flexible financial solutions that are mutual funds. Except for ELSS schemes and closed-ended funds, an investor may invest in any mutual fund and redeem their investment at any time. Due to this, investors are able to select the mutual funds they desire while keeping in mind their investment objective.
• The Buy-and-Hold Approach: This is a common method of investing. This method comprises buying investments and keeping them for a long time, regardless of whether the markets are increasing or dropping. Conventional wisdom is that if you employ a buy-and-hold strategy and endure the market's ups and downs, your returns will eventually outweigh your losses.
• Purchase balanced funds: Balance advantage funds include debt, stocks, and, in certain cases, gold. When the fund management rebalances their portfolio, they will shift partially from debt to equity, allowing them to acquire equity investments at lower costs. If stock markets decline, the proportion of equity assets in the fund portfolio will decline.
• Make SIP investments: Systematic investment plans (SIPs) are a great way to invest if you're new to the stock market. A SIP allows you to buy more units when the market is down and less when it is up. Because it is hard to predict market tops, bottoms, or directions in the near future during these chaotic times, investing through a SIP is the best choice.
• Recognise When to Close a Mutual Fund: For an investor, choosing when to withdraw from a mutual fund is critical. Unfortunately, many individuals stop investing in mutual funds when the market turns down, which is not a wise course of action. The knowledgeable fund managers are aware of how to rebound from a bad period and profit fully from it.

Benefits of Mutual Funds

Mutual funds are a popular investment choice, offering many advantages to investors. Here are some of the key benefits:

Diversification and Risk Reduction

Mutual funds provide an efficient way to diversify your portfolio by investing in a wide range of securities, typically 50 to 200, across different asset classes and sectors. This diversification helps to reduce portfolio risk, as your investment is not dependent on the performance of a single security.

Professional Management

Mutual funds are managed by professional fund managers who conduct research, select securities, and monitor the fund's performance. This advanced portfolio management provides valuable expertise and saves you time, as you can leave the investment decisions to these professionals.

Dividend Reinvestment

Mutual funds allow for dividend reinvestment. Dividends and interest income earned by the fund can be used to purchase additional shares, helping your investment grow over time.

Convenience and Fair Pricing

Mutual funds are easy to buy and understand, with low minimum investment requirements. They are traded once per day at the closing net asset value (NAV), eliminating price fluctuations during the day. This provides fair pricing and reduces arbitrage opportunities.

Lower Costs

Mutual funds can provide lower costs for investors. By pooling investments from multiple shareholders, mutual funds can achieve economies of scale, reducing the overall costs for each investor.

Easy Access to Money

Mutual funds offer easy access to your money. You can buy and sell shares, as well as convert your assets to cash, with relative ease.

Lifestyle Funds

Mutual funds, such as lifecycle funds, can be tailored to your retirement plans and risk tolerance. These funds automatically adjust over time, allowing you to maintain the desired risk level.

While mutual funds offer these benefits, it's important to remember that there are also disadvantages, such as high expense ratios, sales charges, tax inefficiencies, and potential management abuses. It's essential to carefully research and understand the specific mutual fund you're considering before investing.

Frequently asked questions