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Personal Finance

How to buy Mutual Funds in a No Load Regime

SEBI has banned entry loads in mutual funds. From August 1, any mutual fund purchase will be invested in full in the fund. Distributors, if they like, must be paid separately.

This is a welcome move, as entry loads don’t make sense for everyone. There are people that need advice. There are those that don’t. For the latter, ponying up money is a waste – they already know what to buy.

Yet, we now have a problem. Most distributors aren’t going to want to travel the distance to get you forms, take cheques and get you your mutual fund statements, unless you pay them separately. Since they are used to the 2.25% commissions, they will ask you for that much, even if the work involved with a 1 lakh purchase is the same as a Rs. 5,000 one.

How do you buy mutual funds then? If you’re buying from a fund for the first time:

  • Download forms off the internet. Most fund houses have application forms available online. Unfortunately they don’t allow online submissions for first time apps.
  • Fill the forms with the right details. Call the local office of the fund house if you need help. (If you can’t do this – call a distributor and tell him you’ll pay)
  • Remember to check any box that says allow online access using PIN or such. And put your email id in there.
  • Now call the local office of the fund house, or the nearest CAMS/Karvy office. You will have to go there and deposit the application form, with a copy of your PAN card and the cheque.
  • If the fund house wants to be nice they will send a person over to collect the stuff from you – otherwise you will need to run there.
  • If the distributor of the fund is CAMS, then you can go to and get yourself a statement by email once the purchase has been registered.

I will create a spreadsheet listing fund houses, their online transaction capability and web sites.

CAMS and Karvy sites are useful to get transaction details etc. Each mutual fund house will have one of the two as the registrar, and you can find out which one your fund uses by calling your fund or checking the respective sites.

Remember to write “DIRECT” as the broker code in the application form. You may not pay upfront loads but you will pay what is called a “trail” commissions – payable yearly to the distributors. If you don’t write DIRECT, someone could write in their ARN code, taking some money off the fund.

Some pain is now being transferred into the fund. Earlier trailing commissions would be of the order of 0.50% a year. Now, to offset the lack of entry load, funds are looking to up trail commissions to 1% or more. This will eventually show up in the “management fee”. Luckily this is restricted to an overall 2.5%, but it means that the hitherto lower cost funds which were charging 1% fees might up the costs. MFs are also upping exit loads to pay trail commissions (beware of the agent that asks you to exit early!).

What you want to do is, when you’re investing, totally avoid insurance agents or mutual fund distributors trying to sell you insurance. They will sell you ULIPs which have big fat commissions. There’s an IRDA circular but that’s not a big deal – just a farce compared to what SEBI has done.

Mutual funds may be tradeable online if an AMFI initiative to set up online trading (buy/sell any MF) happens, by March 2010. Till then, be prepared to do more work yourself.

Couple interesting links:

  • Pankaj Batra has a list of all web sites of AMCs (fund houses) and lists the ones that allow online transactions.
  • There’s this site called “” (they tweeted me) which allows you to register online, and then purchase/sell mutual funds. They don’t have any upfront commissions, and they make their money off trail commissions. May be worth trying – I have no personal experience and no vested interest in it.
  • Prasanth says:


    I read a news item about a Chennai based company known as which enables you to buy MF's online. I checked out the website – not bad. They do have some paperwork when you register though. And this is not a "true" MF trading platform – here fundsindia is the broker and they make money through the "trailing" commissions payed by the MF's – the good thing is that they mention this clearly on their website

  • Kasi Viswanathan says:

    >Thank you very much for this wonderful blog article on how to buy mutual funds directly.

    I purchase mutual funds online via my citi investment A/c and how does citi charge my purchases via their investment a/c. What if citibank charges a service fee for buying and selling of mutual funds.

    Could you please clarify whether its okay to continue with Citibank and what are the Pros and Cons of Buying Online.

    I find it easy to buy and also redeem units as the timeframe for redemption is limited and also hassle free redemption without ever running to Mutual fund office and indefinite wait etc.

    Look forward to your view on the above.

    Kasi Viswanathan

  • Anonymous says:

    >Hey Deepak,

    Thanks for posting your thoughts of personal finance and investing. Thought this link ( may be helpful in case you are creating an excel sheet for public awareness.


  • Deepak Shenoy says:

    >Thanks folks, have updated links on the post.

    Citi – it should be ok as long as they don't intend to charge you for using the service.

  • Anoop says:

    >By the way, ICICDirect revised intoduced fee. Totoal invested more than 8 lakhs, pay nothing. Else Rs100 for lumpsum transaction and 30 Rs for SIP traction.

    Now invsting 1000Rs lumpsum days are over. You will be paying 10% charges.

    Great things happening.


  • Srikanth Meenakshi says:

    >Deepak, Thanks for adding a note about us (FundsIndia). Appreciate it! (I am director at the company and run the @fundsindia account at Twitter)

  • Raj Gopal Vuppala says:

    >I just want to highlight benefits in numbers to investors.

    If any investor had invested in a MF through SIP for 11 years and has paid entry load. If the fund generated a gross 10% return, then the net return to the investor after deduction of entry load would be 9.63%. An entry load of 2.25% results in 0.37% reduction in yield.

    The main benefit of waving the entry load is for the short term investors who are forced to churn by agents. Taking the same example, if an investor invested for 1 year and the fund generated a gross 10% return, then the net return to the investor after deduction of entry load would be 7.52%. An entry load of 2.25% results in 2.48% reduction in yield. The real benefit of removing the entry load is significantly beneficial to the short term investors and this also gives an idea how much money the investor is losing due to churning on a yearly basis. (I have not included the mutual fund expense ratio in this calculation).

    I would also like to tell you, the move by IRDA is also very beneficial to investors. It is very significant when you compare what the current plans are charging. I have got online quotes for some ULIP's for a 11 year investment horizon and the following is the reduction in gross yield due to charges assuming 10% returns.

    HDFC Endowment Plus II (3.76% charges)
    HDFC Unitlinked Enhanced Life (3.92% charges)
    ICICI Lifetime Gold (3.80% charges)
    ICICI Pru Lifestage Assure (4.33% charges)
    Bajaj Allianz Unitgain Plus Gold (4.31% charges)
    Reliance Super Investassure Plus (3.93% charges)
    Reliance Super Automatic Investment Plan (3.56% charges)
    IDBI Wealthsurance (3.41% charges)
    Future Generalli Sanjeevini (3.66% charges)
    Kotak Smart Advantage (4.51% charges)
    Kotak Safe Investment Plan II (3.29% charges)
    Kotak Head Start Assure Wealth (3.20% charges)

    For instance if the fund gave a gross 10% return, the investors net return is only 6.24% if invested in HDFC Endowment Plus II. The reduction in yield is because of all the charges. IRDA has now mandated that reduction in yield not exceed 2.25%. So looking at the current ULIPS that I got quotes for, none of them comply to the charge structure specified by IRDA. I have mentioned the percentage by which the charges overshoot the guidelines specified by IRDA . So ULIPS do have to cut down their charges by that amount which is a decent benefit to investors who are being forced or obligated to invest in ULIPS.

    HDFC Endowment Plus II (67.11% higher charges)
    HDFC Unitlinked Enhanced Life (74.22% higher charges)
    ICICI Lifetime Gold (68.89% higher charges)
    ICICI Pru Lifestage Assure (92.44% higher charges)
    Bajaj Allianz Unitgain Plus Gold (91.56% higher charges)
    Reliance Super Investassure Plus (74.67% higher charges)
    Reliance Super Automatic Investment Plan (58.22% higher charges)
    IDBI Wealthsurance (51.56% higher charges)
    Future Generalli Sanjeevini (62.67% higher charges)
    Kotak Smart Advantage (100.44% higher charges)
    Kotak Safe Investment Plan II (46.22% higher charges)
    Kotak Head Start Assure Wealth (42.22% higher charges)

    It is time the investors cherish the moves taken by both SEBI and also IRDA.


  • Anonymous says:

    >Hi Deepak,

    Nice post as usual. However, I have one question. Pankaj Batra's link on your blog says that, if I invest via CAMS it will not attract any thing. How is CAMS different from other brokers? They are distributors for AMCs so I guess anyway they will be paid by AMCs. Is my understanding correct ? I would like to know if there is any disadvantage for going via CAMS instead of different fund houses.

    Also FYI, I checked with Citibank will charge 2% for investments upto 2Cr in Equity. 1.5% for 2 Crore to 5 Crore nad 1% for above that. However, for Arbitrage/Liquid and other debt funds their charge is going to be zero.

  • Deepak Shenoy says:

    >Anon: CAMS is not a broker, it's a registrar. They are paid by AMCs but much lesser than brokers. Even if you went to a fund directly they will route it through CAMS/Karvy!

    Interesting about Citi. If you put that much money in funds you might as well invest directly through CAMS.