Skip to main content

Mutual Fund buying - Cost Effective Versus Convenient

Besides investing in mutual funds through an independent financial advisor or distributor, the likes of Kumar can invest directly via asset management companies (AMCs), banks and online portals (such as Fund Supermart, iFast Financial). There is yet another option that was launched almost a year before —mutual fund trading platforms —offered by both the Bombay Stock Exchange and the National Stock Exchange. Popularly known as the mutual fund service system or MFSS, it allows you to invest in mutual funds through brokers. Here, an important requirement is a demat account.

On the other hand, approaching an AMC directly will imply spending a few hours in travelling and waiting at the fund house's office.

Cost

If you are transacting through the stock exchange trading platform, you need to pay a transaction charge of about 0.5 per cent and an annual maintenance charge of `500-700 for the demat account.

You do not need to pay an advisory fee, such as in case of distributors and banks. A fee of one-two per cent of investment amount or a flat one of `150200, is typically charged by distributors and banks. When you approach an AMC directly, you do not pay anything over and above the amount you invest.

Redemption

If you want to withdraw from a scheme, the settlement is done on a T+3 basis (transaction day plus three days) on all investment platforms for equity schemes. It means you receive the proceeds three days after redeeming the fund units.

If you apply for redemption before 3 pm on a particular day, you will get the same day's net asset value (NAV) at the market closing time. If applied after 3 pm, the next day's closing NAV will be applicable.

Systematic investment plan (SIP)

While investing through MFSS, you may not be able to invest in SIP. Only a few fund houses, such as Reliance Mutual Fund, offer the SIP option over the exchange platform. Also, you may not have the option of many schemes on this platform, as AMCs have listed only a few equity schemes on MFSS.

We will soon enter the second phase of MFSS and SIP will be made available, other channels of investment can get you a whole host of schemes and SIP to choose from.

Taxation

Mutual fund investments attract the Securities and Transaction Tax (STT) of 0.25 per cent. It is applicable irrespective of the channel you choose to invest through. But the manner of levying the tax varies with your choice of intermediary.

Say, you invest `1lakh in a mutual fund scheme and the investment doubles in a year. If invested via a non-exchange channel, STT (500) will be levied on redemption. But over MFSS, STT is divided into two parts of 0.125 per cent and levied both on investing and redeeming. The total STT payable, here, will be `375 (125 on the investment amount and `250 on the redemption amount).

Loan against mutual funds

A key advantage of investing in funds via exchange platform is that you hold the units in demat form.

For pledging demat units, you need to present the pledge slip, which your broker will give you, and it will go to the lender. The lender, too, assured as the depository holding the units, can act as a guarantor for the fund transaction.

However, when you invest through other channels to pledge the units, you first need to register these with the fund house. The fund house will hand over the transaction receipt that is to be given to the lender. The process can be time-consuming and cumbersome. And, it will get magnified if you hold units with different fund houses.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Popular posts from this blog

Stocks with a high dividend yield

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Stocks with a high-dividend yield can provide investors additional cash flow. More importantly, it is tax-free   With April 2011 just over, the 'earnings season' is well and truly here. This is the time most companies pay out a portion of their profits as dividends to shareholders. Since dividends are tax-free, they are an attractive income source with a select class of investors, who depend on these for additional cash flow. SIGNIFICANCE A company doing well and generating profits will usually be in a position to declare dividends regularly. Hence, a key parameter one should look at whilst investing in a stock is whether the company has a good dividend record. Typically, dividend yield stocks are large-caps and generally not capital-intensive. This is suggestive of the fact that the downside risk on...
Read more

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

Systematic withdrawal plan

  Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP   iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...
Read more

Mutual Fund Review: Tata Balanced

  It underperformed severely at first, but Tata Balanced has shown its mettle in the past five years… After five years of severe underperformance, the fund began to pull up its socks in 2002 and delivered a brilliant performance in 2003. Such a top quartile performance was repeated only in 2007 and 2009. By and large, this fund is not known for its outstanding returns, but over a long-period of time, its investors won't be unhappy. Over the past five years ended May 31, 2011 it has delivered an annualized return of 14 per cent (category average: 11%).   In 2008, it was the high exposure to Metals and Capital Goods that hit the fund hard. Towards the end of that year, exposure to both the sectors was reduced significantly while that to FMCG was increased. Once the market began to rally in 2009, the fund manager immediately reduced allocation to FMCG from 16 per cent (March 2009) to 4 per cent (May 2009) and exposure to Technology began to increase. These moves helped the fund...
Read more

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now