MF investment:Take your pick

In the last few months, a number of new platforms have been launched for buying and selling mutual funds (MFs). With the Securities and Exchange Board of India (Sebi) banning the entry load for all MF schemes, both distributors and banks now have to renegotiate their fees with customers.

Consequently, some distributors have taken the online route by launching websites for small-ticket customers. Recently, both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) launched their online platforms for trading in MFs.

However, before one selects an option, attention has to be paid to the cost involved. There are basically two kinds of cost involved. An advisory cost and, in some cases, a transaction cost.

Banks: Banks sell all kinds of schemes, but for an advisory fee. Though this varies for different banks, an average figure is 1.5-2 per cent. It could differ according to the size of the investment as well.

But for those who are investing a much smaller sum of Rs 500-1,000, there could be a minimum advisory fee of Rs 50-100.

Kartik Varma, co-founder, iTrust Financial Advisors, said, “While banks charge an advisory fee for investing, applying through their online portals can be cheaper because there is no advisory fee involved.”

Independent financial advisors (IFAs): IFAs charge an advisory fee in the range of 1-1.5 per cent. If an investor wants to put in Rs 10,000, he may have to pay Rs 100-150 for investing in each scheme. IFAs also maintain portfolios and send monthly statements.

At times, IFAs can charge both advisory and transaction fees. In such cases, the transaction fee will be Rs 50-100 more per transaction.

Portals: Online portals such as ICICI Direct, Artha Money and FundsIndia allow investors to transact online through their platforms for trading in mutual funds. They levy a fee of Rs 30-50 per transaction.

In most cases, the investor has to go through the entire database and select a scheme himself. As a result, there is no advisory fee. “For some sites which cater to high net worth individuals (HNIs), there is a one-time charge ranging from Rs 5,000 to Rs 6,000,” said Radhika Gupta, director, Forefront Capital Management.

Brokers: The brokerage charge is 0.5 per cent. However, most brokers are not too keen on small investors because the transaction fee and the scale of investments are not substantial.

NSE, BSE online platforms: The newly-launched online platforms of NSE and BSE are the latest entrants in this market. However, to invest in mutual funds through this route, one needs to have a dematerialised account (demat account).

For this, there would be an annual cost of Rs 400-600 for the demat account. In addition, there would be a brokerage fee of 0.5 per cent. Additionally, there could be a transaction fee of Rs 30-50. “Online platforms can get more expensive because of multiple costs,” said Gupta.

Wealth managers: Sebi-registered wealth managers are typically meant for HNIs. Their fee structure is different. For one, they could charge you for financial planning. After that, there would a cost for managing your money.

Clarification

FundsIndia has clarified that mutual fund transactional services on their portal, including advice, are free of cost. Also, there is no transactional cost. The error is regretted.