Mutual Funds: Pay Attention To Small Details While Investing
One of the key parts of the entire investment process is the time when the investment is actually made.
Mutual fund investing calls for a lot of attention to small details. If any small part is missed out at some place, then the entire process can come to a halt, which will derail the plans of the investor. It is easy to make various decisions about the choice of funds and the amount to be allocated to various areas but if this is not implemented properly, then the whole effort can be wasted as the investment will not go through.
One of the important things to watch out for is the manner in which the investment is done and the way the money is transferred.
Purchase Process
The purchase of units in a mutual fund involves the selection of the scheme and the specific plan that the investor wants to put money in. Once this is done, then the specific amount or units need to be bought.
Normally, in case of an existing fund, the investor will put in a specific fixed amount and then, the mutual fund will allot units at the applicable net asset value for the specific amount of the investment.
For example, if the investor has decided to invest Rs 20,000 and the NAV is Rs 40, then the investor will be allotted 500 units for the purchase. The NAV can be any figure in decimals, so the investor is also allocated the units in decimals based on the amount that has been invested.
Applicable NAV
One of the key parts of the entire investment process is the time when the investment is actually made. Based on the time of the investment, the investor is allocated the units based on a specific days NAV.
When it comes to equity funds, the cutoff time for an investor to get the same-day NAV at most places is 3 p.m, which means if the investment has come before this time, then they will get the same-day NAV.
This is important from the perspective of the various ups and downs that are occurring in the market because if there are large changes like a big fall and a big rise, then when the units are allotted determines which NAV will be applicable.
Transfer Of Money
The main factor that many investors tend to ignore is that there are new rules that are in place where it's not just the time of making the investment that is important. An even bigger point is that there has to be actual transfer of money for the investment from the investor to the mutual fund. This is the most crucial factor because unless this money transfer actually takes place, the units will not be allotted.
Several times, this is the place where things get stuck because the payment has not gone through and the money has not reached the mutual fund. This transfer of money actually depends on the mode of payment that one has used and the place where the investment has been made.
Take for example a case where the investor is at the mutual funds website and they are transferring money through the route of internet banking. If this is the case, then the money will have gone directly to the funds account when it goes out of the bank of the investor.
As compared to this, there can be a case where the investor used an intermediary or a platform which will process the payment and then transfer the money. If there is any problem with respect to the technology on the platform, then the payment could be delayed.
Similarly, if the bank is not able to handle the transaction and there is a delay or the payment is not done, then the investor could have done everything possible but they will not get the units till the time that the money is actually moved.
This is why paying attention to how the money is moved and the action of the bank becomes an important factor that determines the execution of the transaction.
Arnav Pandya is the founder of Moneyeduschool.
