Zerodha Mutual Fund Safety: Invest With Confidence?

Investing in mutual funds through Zerodha is considered safe. Zerodha is the largest discount broker in India, with over 1.5 crore investors. It is a reputable and well-established company that offers a range of investment services, including mutual funds. Zerodha provides a dedicated direct mutual fund investment platform called Coin, which offers mutual funds from 40+ Asset Management Companies (AMCs).

One of the key advantages of investing in mutual funds through Zerodha is that there are no brokerage charges or commissions. Zerodha only offers direct mutual funds, which means that investors can save 1% to 1.5% per year in commissions that would typically go to brokers. This results in higher returns for investors.

Additionally, Zerodha provides a user-friendly platform that allows investors to start, pause, or stop Systematic Investment Plans (SIPs) online at any time. The process of investing in mutual funds through Zerodha is straightforward. Investors can open a Zerodha account, complete the KYC process, add funds to their account, choose the mutual fund they want to invest in, and place their order. The mutual fund units are then credited to the investor's demat account.

Overall, investing in mutual funds through Zerodha is a safe and convenient option for individuals looking to grow their wealth over time.

How to open a Zerodha account for mutual funds

Here's a step-by-step guide on how to open a Zerodha account for mutual funds:

Step 1: Open a Zerodha accountTo begin, visit the Zerodha website and click on the 'Open an account' button. You will need to provide basic information such as your name, email address, and phone number. Once you have submitted this information, you will receive an email with a link to complete the account opening process. Follow the instructions in the email to finalise your account setup.

Step 2: Complete the KYC processAfter opening your Zerodha account, you must complete the KYC (Know Your Customer) process, which is mandatory for all investors in India. Provide essential documents such as your PAN card, Aadhaar card, and address proof to complete the KYC process. You can complete the KYC process online by logging into your Zerodha account and following the instructions provided.

Step 3: Add funds to your accountTo invest in mutual funds through Zerodha, you need to deposit money into your account. Log into your Zerodha account and click on the 'Add Funds' button. You can choose from various payment methods, including net banking, UPI, or debit card, to add funds to your account.

Step 4: Choose the mutual fund you want to invest inOnce your account is funded, it's time to select the mutual fund that aligns with your investment goals. Log into your Zerodha account and click on the 'Mutual Funds' tab to explore the available options. You can choose to invest in a lump sum or opt for a systematic investment plan (SIP), which allows you to invest a fixed amount at regular intervals such as monthly or quarterly.

Step 5: Place your orderAfter deciding on the mutual fund, click on the 'Buy' button. Specify the amount you want to invest and select your preferred payment method. Once you confirm your order, the mutual fund units will be credited to your demat account.

Completing the KYC process

To complete the KYC process, you will need to provide some basic details and documents, including:

• PAN card
• Aadhaar card
• Address proof

You can complete the KYC process online by logging into your Zerodha account and following the instructions. Alternatively, you can complete the KYC process offline by submitting the necessary documents to a Zerodha branch office or authorized person.

It is important to note that your KYC details will need to be updated if your account has been inactive for a year.

Adding funds to your account

To add funds to your Zerodha account, follow these steps:

Step 1: Log in to Your Zerodha Account

Access your Zerodha account by logging in using your credentials.

Step 2: Navigate to the "Add Funds" Section

Once you are logged in, find and click on the “Add Funds” button or option. This is usually located within the “Funds” tab or section of your account dashboard.

Step 3: Choose Your Preferred Payment Method

Zerodha offers several payment methods for adding funds to your account. You can choose from the following options:

• UPI (Unified Payments Interface)
• Instant payment gateway
• IMPS (Immediate Payment Service)
• NEFT (National Electronic Funds Transfer)
• RTGS (Real-Time Gross Settlement)
• Cheque

Step 4: Enter the Amount and Complete the Transfer

After selecting your preferred payment method, enter the amount you wish to add to your Zerodha account. Follow the instructions provided by Zerodha to complete the transfer.

Please note that each payment method may have different processing times, limits, and associated fees. For example, UPI transfers are instant and free of charge, while the instant payment gateway option incurs a charge of ₹9 + 18% GST for the convenience of instant credit.

Choosing a mutual fund to invest in

Define your investment objectives and risk tolerance:

Clearly understand your financial goals, whether it's saving for retirement, buying a property, or financing your child's education. Different mutual funds cater to diverse goals, so it's essential to choose one that aligns with your objectives. Assess your risk tolerance and choose a fund that matches your comfort level. Equity funds, for example, typically carry higher risk but offer higher potential returns, while debt funds are considered less risky and suitable for shorter investment horizons.

Evaluate the fund's performance and expense ratio:

Analyze the fund's historical performance over the last three, five, and ten years. While past performance doesn't guarantee future results, it can be an indicator of the fund manager's quality. Compare the fund's returns with its benchmark and peer group, considering consistency and stability. Additionally, pay close attention to the expense ratio, which is the annual fee charged by the mutual fund for managing your money. Funds with lower expense ratios will result in higher net returns for you.

Understand the investment strategy and liquidity:

Different mutual funds have different investment strategies, such as growth, dividend, or index-focused approaches. Choose a fund that aligns with your investment style and preferences. Also, consider the liquidity of the fund, including features like lock-in periods, exit loads, and redemption limits. Opt for a fund that offers flexibility in withdrawing your money when needed.

Consider the fund's tax implications:

Mutual funds are taxed differently depending on their type and duration. Understand the tax implications of the fund you're considering and choose one that offers the best post-tax returns. Take advantage of tax benefits available for certain funds, such as equity-linked savings schemes (ELSS).

Opt for direct plans:

Direct plans allow you to invest in mutual funds directly without any intermediaries, resulting in lower expense ratios and higher potential returns. You can invest in direct plans through the online platforms of mutual fund houses or third-party portals.

Analyze volatility, beta, and fund manager performance:

Especially in volatile markets, managing risk effectively is crucial for protecting and growing your capital. Analyze factors like volatility and beta, which measure the fund's sensitivity to market changes. Additionally, consider the fund manager's performance and their ability to deliver consistent results.

Remember to do your research and compare different funds before making a decision. You can use tools like the Zerodha Coin platform to analyze historical performance and make informed choices. Diversifying your investments across different asset classes and fund types can also help mitigate risk and improve your overall investment portfolio.

Placing your order

To place your order, follow these steps:

Step 1: Log in to the Zerodha Coin website or mobile app

Use the same login credentials as your Zerodha Kite account. If you don't have a Zerodha account, you will need to create one.

Step 2: Search for the mutual fund you want to invest in

Use the search bar on the Coin dashboard to search for a specific mutual fund or AMC. You will then be able to see the direct mutual fund option.

Step 3: Choose your investment amount and frequency

If you are investing a lump sum, simply enter the amount you wish to invest. If you are setting up a Systematic Investment Plan (SIP), choose the initial investment amount, frequency (weekly, monthly, etc.), and installment amount.

Step 4: Review and confirm your order

Check the details of your order, including the amount and payment method. Once you are sure everything is correct, confirm your order.

Step 5: Set up automatic payments (optional)

If you want to set up a Systematic Investment Plan (SIP), you can register for the e-mandate feature to automate fund transfers. This can be done by adding your debit card or net banking details.

Step 6: Track your order status

All SIP orders placed before 1:30 pm on trading days will be sent to the exchange on the same day. Orders placed after 1:30 pm will be sent for execution on the next trading day. You will typically receive your mutual fund units in your demat account within 2-3 working days.

Frequently asked questions