How to invest in mutual funds online for minors

A minor mutual fund investor is required to operate under their own name as per the regulations established by the Indian government. Minor will be the only person holding the portfolio, and they will be the first to do so. The responsibility of the guardian is to educate children on investing and inform them of the terms and conditions of investment policies. Furthermore, in certain instances, a minor is prohibited from making financial decisions in their own name. This is the reason why a guardian is necessary to oversee the account.

Are mutual fund investments permitted in the name of a minor?

The common question is whether a minor can invest in mutual funds. Yes, individuals under the age of 18 can participate in mutual fund investments, however, there are certain legal and procedural aspects that need to be taken into account. Although minors are not able to own mutual fund units directly, they can still invest in mutual funds with the help of a custodian, who is usually a parent or legal guardian. SEBI allows investments in minors' names through the UGMA or UTMA, based on the state's regulations.

Caretakers are given the power to manage and supervise mutual fund investments for minors until they become legal adults. It is a smart approach for parents to set aside money for their child's future. Nonetheless, there are different legal frameworks, so it is crucial to comprehend the specific rules and regulations in your country to ensure compliance and make well-informed investment choices for minors. Careful assessment of the legal landscape and understanding the importance of custodianship are essential. Investing in mutual funds can be a useful financial planning tool for minors, aiding in the creation of long-term wealth.

What are the steps for a minor to invest in a mutual fund?

Opening a mutual fund account for a minor is like opening a standard mutual fund account. These are the procedures:

Choose the fund house

Assess and contrast various funds by examining past performance, fund managers, expense ratios, portfolio assets, and other factors.

Select guardian's name

The investment in the mutual fund must be under the minor child's name. Nevertheless, the guardian will be listed as the holder of the units. Decide whether to open the account under the father's, mother’s, or legal guardian's name.

Fill out the application form

Complete the mutual fund application form with information about the minor such as name, date of birth, PAN, etc. Include the guardian's details and their relationship to the minor. Provide documentation for the guardian and minor showing identity and address.

Make payment

Create a cheque or demand draft for the first investment sum under the guardian's or minor child's name. Many AMCs also accept online payments through net banking or UPI.

Submit forms

You can drop off your filled-out application form and required documents at the closest branch office of the Asset Management Company (AMC) or their registrar and transfer agents such as CAMS or KFIN. If you're making the payment online, you should expect to see your investment show up within a few days.

Documentation Required for Investing in a Minor's Name

The following essential documents are needed to initiate a mutual fund account for a minor:

• Starting off, you must confirm the age and date of birth of the minor. This must be shown in a birth certificate, or a government-issued passport.
• In the second document, make sure to confirm the minor's connection with the guardian.
• For parents, a birth certificate or passport containing the parent's name is enough. A court order will be sought in the event of a legal guardian.
• Furthermore, the parent or guardian of the minor will be required to adhere to current SEBI regulations regarding KYC. As mentioned before, the SIP will expire once the minor turns 18 years old and will end automatically at that time. Following that date, the individual who was a minor and has now reached adulthood must go through the KYC process under their own name.

Bottom line

Mutual funds are beneficial investment choices to help secure your children's future, as they have the ability to increase capital through compounding. Making a smart choice involves instilling discipline in saving a small amount of money each month for your child's education and future savings. Investing in mutual funds is a simple and convenient method to establish a substantial fund for your children's future.

FAQs

Q. Can a minor buy mutual funds?

A.Yes, minors can invest in mutual funds, but some legal and procedural factors must be considered. While juveniles cannot directly hold mutual fund units, investment in mutual funds for minors can be made through a custodian, generally a parent or legal guardian.

Q. Can I invest in mutual funds at 18?

A. Once you're ready to start investing, it's time to open and fund a brokerage account. Anyone at least 18 years old can open an online brokerage account. People who are younger than that will need a parent's assistance.

Q. Can I open a Zerodha account for a minor?

A. Discount brokerage firm Zerodha on Thursday announced the launch of a new service in which parents can open Zerodha accounts for their kids online and invest in stocks, mutual funds, and bonds with them. Zerodha has also made minor account opening free and is also waiving off the annual maintenance charges (AMC).

Q. Which is the best demat account for minors?

A. Minor Demat Account. With FYERS, you can secure your child's future with a better alternative to all children plans in the market.

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