Learning
Picking the right mode for your mutual fund
There is more than one way to hold your mutual fund investments
25-Sep-2023 •Shubham Jain
Mutual funds have become one of the most sought-after investment options in the country. However, were you aware that you can hold your mutual funds in multiple ways?
Typically, people follow their fund distributor's advice blindly but know little about their mutual fund holding type. Here, we will learn about the different methods of mutual fund holdings that can help you make smarter investment choices.
Broadly, there are two modes of owning a mutual fund:
- Individual
- Jointly
- Joint
- Either or Survivor
- Anyone or Survivor
Let's understand each of these categories in detail:
| Individual | Joint | Either or Survivor | Anyone or Survivor | |
|---|---|---|---|---|
| Number of account holders | Single account holder (minors are eligible too). | Up to three account holders. | Two account holders. | Up to three account holders. |
| Ideal for | Those who want complete control over their investments. | Those who want complete control over their investments and don't want transactions to take place without their knowledge. | When both holders want access to the investments without needing approval from each other. | When all investors want to manage the investments without seeking approval from each other. |
| How it works | The individual holds complete authority over all transactions. | Transactions require approval from all the account holders simultaneously. | Transactions require the approval of either of the two account holders. | Transactions require the approval of any of the three account holders. |
| Communication regarding investments | Made to the individual. | Made to the primary holder. | Made to the primary holder. | Made to the primary holder. |
| Tax liability | Borne by the individual. | Borne by the primary holder. | Borne by the primary holder. | Borne by the primary holder. |
| Mode of creation | Online or in-person. Minimal paperwork needed. | In-person since it requires simultaneous approval from all the account holders. | Both online and in-person options are available. However, most online intermediaries expect customers to contact them in-person. | A few large fund houses allow online account creation. However, most investment platforms expect clients to contact them in-person. |
What suits you best
-
Choose the 'Individual' option if you can manage all your transactions.
-
Choose 'Joint' if you and the other investors live together, and each one wants complete control over the investments. Let's say a family of three includes both parents and their son, all of whom reside together. In such a situation, having a Joint account is beneficial since all of them can approve the transactions and track them at the same time.
-
Choose 'Either or Survivor' option in case you are a couple and one of you is not available all the time.
-
Another scenario where an Either or Survivor account is beneficial when out of the two account holders, one of them lives abroad. Let's assume the son is an NRI while his father resides in India. In this case, having an Either or Survivor account helps since the father can manage the investments even in his son's absence.
- Choose 'Anyone or Survivor' if you and two other investors want to handle a mutual fund investment but live across different states. By having an Anyone or Survivor account, the three of you can handle transactions independently without requiring approval from each other.
Key takeaway
Mutual funds can be held either individually or jointly. Depending on your needs, you can choose to start a mutual fund investment either on your own or with someone else.
