Go direct & online to buy a Mutual fund

Direct plans offered by mutual fund industry is once again in spotlight after SEBI chairman U K Sinha said that it is looking forward to a model where a prospective investor can buy mutual fund directly from an online platform without any middlemen. This has been the ideology of the fund houses which has been promoting the direct route aggressively since the last two years. Almost every fund house has a direct investment tab right on their respective homepage making it easier for people to take a leap towards investing, without any middlemen.

Infact, investing in mutual funds has never been easier. Gone are the days when the applicant had to fill reams of forms and physically submit them at collection centers or fund houses. Today, the entire procedure can be done in a matter few clicks. Over the last two years, the options available for an investor to invest into mutual fund via the online route have been multifold. All these platforms available make sure the paper work is next to nil. Even, Know Your Customer (KYC) has gone the online way now.

Going Direct

Other than going online, the customer is also provided with an option to bypass brokers/distributors completely by way of direct investment. Today each and every mutual fund scheme comes with two options in the form of a regular plan or a direct plan. The difference is that in direct, the investor does not have to pay for any intermediates like a distributor. This automatically translates to lower expense ratio, which is a notable advantage for direct plans over regular plan. The difference between the between the two can be as high as 100 bps or 1%.

One of the important points to note is that the Net asset Value (NAV) for direct plans will be higher than regular plans, even as the portfolio construct is similar. This is solely because of the difference in in cost structure. For a long term investor the benefit of going the direct route can be quiet significant. (See Table)

Source: PersonalFinancePlan.in

While going direct is a great idea, it may not be the best option for a first time investor. Choosing an ideal product from the eight thousand plus options available can be a harrowing task. Also, it is necessary to understand a product that an investor is signing up for. That's where the role of an advisor comes in. A wrong choice can prove to be much more costly that the money saved by going direct. "If the investor is confident and has sound knowledge in mutual funds and knows when to switch funds in a tax efficient manner etc then such an individual can go direct," according to Scripbox CEO Ashok Kumar.

Platforms Available

MF Utility

Through this platform, an investor can invest in multiple schemes of any AMC in a single transaction. Before the transaction, one has to get a CAN (Common Account Number) activated. For joint holdings, a separate CAN has to be applied for. The user can buy, sell, and instruct Systematic Transfers (STP) or Systematic Withdrawals (SWP) via this platform.

When it comes to investment through the SIP route, the investor has to register a one-time bank mandate through PayEezz. There is absolutely no cost involved in procuring CAN or making transaction via this platform. Even if you already have made investments, Utility platform maps all those holding based on the user's PAN number, presenting a complete picture of the user's mutual fund investments. There is no need to remember separate folio numbers with regards to each investment while transacting through this platform.

myCAMS

This platform is available in the form of a website or an app. Its functioning is very much similar to MF Utility. One can buy, sell, switch between schemes etc. One can invest in both regular and direct plans through this platform. The only limitation to this platform is that myCAMS will allow you to transact only in those funds which are serviced by my CAMS.

Unovest

This is another platform to buy direct plans. You can make lumpsum purchases, start SIPs and do STPs, SWPs and make Switch transactions (including that from regular plan to direct plan) through Unovest. It offers transactions in schemes of 25 fund houses. The platform has no per transaction fee but has a flat annual fee which is paid to access your paid account. Also, there is no restriction on the number of transactions in direct schemes. The platform also allows a regular plan fund to be migrated to direct plan. After uploading one's current investment, the platform sends alerts on the schemes that can be converted into Direct Plans. Along with this, the platform also intimates the user as to when would be ideal time to make the switch keeping in view the lock-in period and when the investments will be capital gains tax-free.

Invezta

This platform currently offers plans from 16 fund houses and works in the form of a robo- advisor. On the basis of the user's risk profile and investment tenure, their proprietary algorithm puts forth recommendations of handpicked schemes. There are three different packages offered in the form of started, basic and premium. For Starter, there is no fee till the investments reach Rs. 50,000. Basic comes at the cost of Rs 79 per month while premium which is an advisory account comes at the cost of Rs 109 per month. However, for the premium users the company promises to refund the advisory charges for that particular period when their recommendation fails to beat the category average return

ORO Wealth

This too is a robo-advisroy platform for only direct plans. It uses the MF Utility infrastructure. They have two plans available. In the first plan, the company charges a convenience fee of Rs 50 per transaction. In that single transaction, the investor is allowed to transact in up to 12 funds, across multiple MFs. In the second plan, which offers value added services, a flat fee of 0.05% per quarter, is charged. This is approximately equal to Rs 50 per quarter on investment of Rs. 1 Lakh.

Not-so-sure type of investors

Given the wide range of options available, selecting a mutual fund scheme can turn into a daunting task. For such kind of persons, platform such as FundsIndia and Scripbox can prove to be helpful. These platforms basically provide a user with investment advice based one's risk profile and the top fund options in each of the category (equity, debt) that a user wants to invest in.

Here Srikanth Meenakshi, Co-Founder & COO of FundsIndia notes that apart from free advisory, each of the option provided on the Fundsindia platform is that of a regular scheme. Same is the case with Scripbox. Where these platform triumphs is the easy to use interface provided which makes it easy for even a novice to make that first investment into a mutual fun product. "What Scripbox effectively does is that it helps you make informed choices and helps rebalance mutual fund portfolio tax efficiently keeping in mind the entry and exit loads," Kumar explains.

So, now with all these options available coupled with in-depth research, there is just no excuse to not invest in a mutual fund.