Articles

a">Forget calling your agent to buy MFs. Enjoy a greater control over your investments by simply going online When he was getting ready to book his dream house, 30-year-old Balaji Gopal urgently needed some money to make a down payment to the builder. He was not perturbed as he had been investing regularly in tax-saving mutual fund schemes for the past five years. However, he had no clue about the total value of his holdings, as he hardly ever read mutual fund (MF) statements. He used to tuck away all the statements that he used to receive in a file. When he opened the file, he realised he had some 20 statements from different brokers and AMCs, adding to the confusion. There was no single consolidated statement. With great difficulty he got details of his investments and liquidated them to make his down payment. With his hectic travel schedule, Balaji decided it was time to go online.

"Very often we get mere files from clients. The starting point itself is the consolidation of all statements," says Vishal Dhawan, a Mumbai-based financial planner. "Investors often invest through multiple brokers, multiple bank accounts and end up creating multiple folios across AMCs," he adds.

Chennai-based Rajaraman Kumbeswaran, used to invest via a mutual fund advisor till a couple of years back. However, calling a mutual fund agent, fixing up an appointment with him and writing a cheque is something he found tedious. That's why he decided to go online. "The biggest benefit of online investment is that there is complete privacy and you don't share your investment details with an agent," says the Chennai-based investor.

Online investment in mutual funds has picked up after the abolition of entry load by the Securities and Exchange Board of India (Sebi) more than a year ago. Margins have shrunk for mutual fund distributors and it has become difficult for them to service investors. "As a result, a lot of independent financial advisors (IFAs), who used to service small investors, have given up their business or are changing their business model," says Ranjit Dani, a financial planner. This further inconvenienced investors who were left without anyone to service them. That's when people like Balaji and Rajaraman went online.

So, how do you go about investing online and what are its advantages? Read on...

WHAT ARE THE CHANNELS?

Shop Online:

You can register and buy mutual funds through independent websites such as fundsindia.com, fundsupermart.com and broking firms of the likes of icicidirect.com and sharekhan.com. You need a one-time registration through the website. Some like icicidirect offer you services free, provided you have invested a total of 8 lakh through them in mutual funds. If the amount is less than that you may have to pay a small transaction fee. Websites like fundsindia and fundsupermart are free for retail investors. This method scores over the stock exchange route since you do not need a demat account for this. You can switch between funds or even discontinue an SIP at the click of a button. You can get a consolidated statement of all your holdings in a jiffy.

Buy From Bourses:

You can trade in mutual funds through the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) the way you buy and sell shares online. All you need to do is register with your existing stock broker by filling up the required two-page form, as mandated by the regulator. Mutual funds bought by you will be credited to your demat account. You can also use your existing demat accounts to convert your existing mutual fund units in dematerialised form. Approach your depository participant and obtain the conversion request form. You can fill this form and attach your statement of account and submit it to your depository who, after due verification, will sent it to the respective asset management company or its registrar and transfer agent. The AMC will credit the mutual fund units into your demat account. If you want to redeem your mutual fund units, you can do it in two ways. One, you can place an order through the stock exchange platform. You can submit the delivery instruction slip to your DP to transfer the mutual fund units the way you submit it for stocks.

However, dealing with the stock exchange has its flaws and has not yet picked up in a big way. Unlike stocks which your broker can buy for you and you can pay on settlement day, the broker needs clear funds to execute a mutual fund transaction. "If an investor gives me a cheque, I can buy mutual funds only when the cheque is cleared, which could take three working days," says Rajesh Tanna, AVP Mutual Funds, Bonanza Portfolio. This is not practical since most clients want to invest at the day's NAV. Secondly, if you want to merely invest in mutual funds, you still need to have a demat account, which entails paying an annual fees, which could be in the range of 400-700 per annum to the depository participant.

WHAT ARE THE ADVANTAGES?

Do It Yourself:

Pune-based, Shashibushan Gokhale, went online because the transactions are in his control. Many a time, distributors are biased and are keen to sell funds that earn them the maximum commission, a deterrent for this software engineer. Going online, he takes research support from independent websites, and invests with the click of a button. Online websites offer you research support which makes decision making easy for investors like Gokhale. Websites like fundsindia.com, fundsupermart.com, icicidirect.com, sharekhan.com amongst others have in-house mutual fund research analysts, who research from the 40-odd AMCs available to give unbiased results to you. They have calculators that help in meeting your goals - be it your child's wedding or your retirement. These websites have asset allocation models that can be used to construct your portfolio based on your age and risk appetite. Besides this, they also have model portfolios which you can replicate while building your own portfolio. A customer portfolio is tracked regularly and updated, which helps him take any corrective action if any. "With this research available, we empower investors to take a decision themselves," says Srikanth Meenakshi, founder and director, fundsindia.com.

Freedom From Paper:

Rajaraman found it difficult to fix an appointment with an agent, take his signature and collect papers. With the online option, he invests when he wants. Late evening or early morning, whatever be the time he simply logs in to check his finances and if need be invests then and there. Today with commissions coming down drastically in mutual funds, it is difficult to find a distributor to service you, due to the high costs involved. Now that Rajaraman is online, even when he is travelling he can easily invest at the click of a button. He can view a single statement for all his investments, with the NAV updated to the last day. So, if you are net-savvy and bored with the paperwork involved, you would be better off investing online.

SOME BLIPS

While the online option has its advantages, buying MF units from SEs poses some problems WHILE INVESTORS buy mutual funds in rupee denominations, in a stock exchange they have to buy MF units. So if they buy 1,000 units of a fund with NAV of 10.6, then they have to pay 10,600, which is an odd figure. This is not investor-friendly STOCK BROKERS deal directly with equities and dealing with mutual funds may not match their temperament YOU MUST check with your broking house if it will charge you a fee for mutual fund transactions. While some offer services for free, it's not necessary that all will do so.

NOT ALL broking houses are active in selling mutual funds through the stock exchange route and many may have a separate distribution arm for it. Hence, check with your broker if he offers this service.

Source: The Economic Times