Zero Expense Mutual Fund Investment

Are you one of those mutual fund investors who loath to pay a single paisa to the MF agent/ advisor? Are you one of those savvy investors who do all there homework, select funds to invest in, but still have to pay the agent for only depositing the filled up form with the fund house? After SEBI abolished entry load for investment in mutual funds still we have to pay something to the intermediary. Since you do all the work of researching and selecting funds why should you pay a single paisa to anybody? Various banks and financial institutions will charge you 1 – 2 %, sometimes a little more for MF investments, presumably for advisory charges. Buying MFs using demat account is not cheap either as you pay while buying and also during selling. If you sell after significant appreciation of your fund the charge as percentage of the initial investment amount becomes even higher.

In the following few paragraphs I present you with a few options where you can transact without paying a single paisa to anybody.

1) If you are a HNI, look no further than ICICI direct. IDirect charges you nothing if your MF portfolio equals or exceeds 8 Lac with them.

2) Most (But not all) MF AMCs now have in place an online investment platform where you can transact with your e-banking account. Nowadays most banks provide you with internet banking facilities free of charge. Make full use of it. Initially you need to make one invest physically through an agent/ broker. Insist on filling the form yourself. Provide your mobile number and email address to avail many useful features such as SMS intimation of transaction etc. If your email is registered with the AMC you can also get statements of your account on demand. Now tick at the proper place to apply for a PIN number which will allow you to perform online transactions. This PIN number will be delivered to you later through courier. Once you get you get your PIN number, you can register with the AMC and make the all the transactions that you want. Just make sure to enter agent code as DIRECT while making purchases. One draw back of this approach is that you have to register individually with the AMCs that you wish to transact with.

3) In the last few months another avenue has opened up foe MF investors. And this is a freeway. Two online mutual fund distributors ( FundsIndia and Fundsupermart ) have made possible what was a desire of many for a long time: MF investment without cost. These two distributors allow you to invest with a variety of fund houses absolutely free of any charge. They earn from the distributor commission and trail commission. You need to make only an one time registration with them.

4) Bajaj Capital offers a service called Transaction Services where they will do the application handling for free.

One of these solutions may be the solution you were looking for. Also the common investment platform likely to be launched by the middle of 2010 may offer another similar option. Let us wait and see. In the meanwhile keep up your saving and investing habits.

Cheers :)

'Direct' dil se

Ever since SEBI allowed abolition of entry load for direct investments into mutual funds I was eager to invest "directly" in MFs. The easiest process is to go to the AMC's nearest office with a properly filled up form, photocopies of necessary documents and you can bypass the agent and agent commission. But this is not the easiest thing for me to do. Its very difficult to squeeze out a couple of hours during the working hours of the financial industry. Also suppose, I want to cancel the SIP, switch funds or do any such transaction. I have to fill up a form a place, courier it to the office of the AMC. It involves several days delay before anything is done. So what I want is online access to carry out the transactions, and also to further invest online. Incidentally, most of the fund houses nowadays allow online portfolio management. But there is a catch. You first have to invest with the fund house through a broker. Then apply for a password with the registrar. The process may vary a little bit from AMC to AMC. But the problem remains the same. You cannot have online access and exemptions from entry load very easily, sitting at home. However Fidelity allows direct online investment. You have to register with them; fill up a form, send it to them along the the necessary photocopies, attested properly. This method also requires some effort on my part, and I hate to work. ( I do not invest in Fidelity funds as of now, but that's not the issue here)

A few days ago all that changed. Birla Sun Life allowed me to open an online account with them on the basis of a past investment that I had made through a broker. Incidentally I had put my email ID in the application form. I had to fill up some data about me ( to confirm my identity) and in 5 minutes I was ready to go. And the best part of it is that I can choose my subsequent investments as 'direct' . It also allows me to use netbanking facilities of multiple banks. Sweet. I didn't have to move a step out of my home.

You must be wondering why I need such a facility. I hate paying entry load, when all my agent does is to collect the form from me and deposit it with the AMC. Of late, I am moving towards using Index funds as my core holdings. There are a few good Index Funds with no front end load, no exit loads either if you stay invested long enough. My necessity of such an online investment avenue is for moving my surplus money out of my savings account into debt funds ( short term, money market, medium term) for periods ranging from a few weeks to a couple of years. I hate to redeem my equity funds to such an extent that I want to forget that I even hold them. So investing in equity funds in such a manner is not my primary objective. Birla Sun Life has a few good equity offerings which might interest you. If you too hate paying entry load , this may be a good option.

( The above article is meant for information about MF investments, and not an insight into my energy levels)