A few days ago I did a post on how to invest in a mutual fund Offline, today will tell you how to do it Online.
There are a few ways how you can invest in a mutual fund online.
1. You already have an IFA (and you think he is adding value to your life): In this case you may already be an investor and may have a folio number. Just get a PIN number from the fund house in which you wish to invest. Every time you invest please remember to put the IFA’s number, or he will not get any brokerage (this is really sad from the IFA’s point of view, but a harsh reality). I was pleasantly surprised to see Fidelity Mutual fund which tags a client permanently to an IFA. This is not something great, but basic hygiene. An I F A selling say Hdfc or Templeton mutual fund is doomed if he tells the customer about the E-investing. The fund house can cut him off – and say well the client did not put your code….Well remember the Golden Rule of investing? He who has the gold makes the rule. The best thing is YOUR IFA gets paid and the money is NOT COMING FROM YOUR fund value (well that is what I believe, not sure how trail works, have not got a nice answer so far).
2. When you are indifferent to which IFA you choose, you can go to www.fundsindia.com and invest directly. They also do not charge you anything for the transaction – so you should be agnostic to this mode of investing.This is again a self help model – you should know which fund to choose, time frame, etc. However if you know how much, which fund, how, why…this is a good model.
3. Go through a bank: here the bank is the IFA and you could get them to do the paper work. However you may have to live with suboptimal advice. Some banks charge a % age of the fund invested – this is a no- no, and you should not be willing to pay this. Some banks charge say Rs. 350 for the first transaction and Rs. 35 per month SIP debit – I see no great reason to pay this, but the amount is quite small and some people are willing to pay it. I am a lover of compounding and do not like to lose small change which could have otherwise been compounded.
4. Go to a broker: This is the most ‘pushed’ – and do not want to get into a controversy as to why who is pushing this. This is a mode by which you go to a broker who does the transaction with a pool, bank does the payment and the ‘units’ go to your demat account. You will have to pay brokerage, the pooling costs (the exchange will charge the broker – who will pass it on to you), and the demat charges – either while buying or selling. Too many intermediaries – and I have no clue why they are doing it free (refraining from giving my views – any way all of you call me cynical and sarcastic :)).
I prefer the IFA route simply because my mutual funds are < 5% of my investment funds and track only 7-9 schemes – frankly do not care whether all the schemes appear in one page or no. I see some value add by the IFA and very importantly I prefer knowing that the mutual fund is a phone call away. If you go through a broker and something goes wrong – my guess is you will go from pillar to post. Nobody will know what went wrong. One banker of mine once gave a statement with all holdings, and no direct statement – I just shut the bank account.
Ask people who have had problems with their demat service provider! They treat you like YOU HAVE stolen the shares.
Yuck! lesser the number of people to deal with in life, the better.
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