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Personal Finance

No Entry loads: Charges for online investing

With the introduction of no entry loads on mutual funds, the distributors have started to charge customers something; what happens to the online sites?

I’d mentioned that distributors would get a lot more difficult to handle, and that you should look for ways to invest by yourself in the no-load regime. Yet, it may be useful to consider what existing distributors are charging.

Some seem to charge an annual fee, some others charge a transaction fee, and some a bit of both. This pays for their intermediation costs.

Most common are the internet web sites that give you access to online investments. I have two MF online accounts – Reliance Money and HDFC Bank’s netbanking. And I know of ICICI Direct. What has changed?

  • HDFC Netbanking: No per-transaction charges. A fee of Rs. 100 per quarter applies. This is huge for someone who has no further plans to invest, and will have less than Rs. 20,000 in the account (the annual charge works out to 2%, even if you don’t do a single transaction). But for someone who’s investing 1 lakh a year, it is useful, as I will demonstrate later.
  • ICICI Direct: Their fee structure is a flat Rs. 100 per lumpsum transaction, for both equity and debt funds. When your portfolio reaches 8 lakhs, no further charges. This is good for the folks that have large portfolios. But it’s huge for those that have small portfolios or want to buy debt funds (entry load on debt funds was anyhow zero)
  • Reliance money charges 1% to 2.5%, depending on how much you buy per transaction (25 lakhs to <5 lakhs), for only equity funds.

Now what are the costs of doing it yourself? Not all mutual funds have online investing ability, and even for those there’s a pretty big waiting time to register, plus the forms to fill and submit etc.

You could go to the CAMS office and drop a filled form/cheque etc. every time. I did a quick calculation of how much petrol it will cost to go to my nearest CAMS center (Sector 14, Gurgaon) which is about 8 km away. For about five transactions a quarter (including debt funds) the petrol cost, to and fro, is about 6 liters of petrol or 300 rupees.

The HDFC deal is good enough for me. Until of course, I get my online registration with all mutual fund companies that I invest with. Of course I only do debt funds now and some tax saver funds, and for equity I will invest direct myself. Your mileage may vary.

Do tell me about the cost other distributors or online sites, if you know any.

  • Shiv Kumar says:

    >the hundred bucks the banks are charging are only teaser rates! they might as well go up if the banks suddenly see 'other income' dropping in the next few quarters!

  • manickkam says:

    >Kotak and Sharekhan doesn't cost their cost their customers.

    Only the transaction costs from the mutual funds at the end of the year is taken as their charge.
    This accounts as 0% service charge for customer side at any point of time, whether it is SIP or lumpsum.

  • NP says:

    >There are other simple ways.
    (1) If you only invest in SIPs mainly (which I do), opt for direct debit from Bank
    (2) Call up the MFs directly and ask them to send forms by Postal mail (Rs.5 stamp)
    (3) You mail them back by Postal mail (Rs. 5 stamp)
    Or local courier (Rs.10 most cities).
    (4) Opt for Direct Credit of redemptions too.
    The above is good for Equity funds. As you do SIP mainly into them.
    (4) For Debt funds, opt for Mutual Funds which provide online investing. Dont chose Debt funds from many fund houses.

  • Chandan Singh says:

    >came across this site for investing in mutual funds – http://www.fundsupermart.co.in

    registration under process for me.

    ~Chandan

  • Anonymous says:

    >Try Bluechip investments, which is a brick and mortar distributor of financial products.

    Cost = Zero

  • Anonymous says:

    >Hi Deepak,
    I have a/c with both Kotak Bank and Kotak Securities. Both let me do mutual fund investing. Kotak Bank charges 1% for equity funds from the HNI crowd while for retail it is 2.25% in equity and ELSS category. Kotak Securities DOESN'T CHARGE ANYTHING for equity and ELSS funds. They claim to get trailing commissions from the fund house. For debt and liquid funds, neither charge anything.

    I find Kotak Securities offering the best. Of course it remains to be seen how long it is free, but for now it is. It also offers a very wide ranging set of funds, much more compared to that of Kotak Bank along with a easy to use portfolio tracker.

    Arpan

  • Oracle says:

    >if i want online interface, i will go for fundsindia.com.

    anyway, good thinking of petrol ( i also think on similar lines). other way to save money may be to send application by post but now they are asking pan card/kyc signed from amfi certified sales person.

    HDFC Bank is charging Rs 200 per quarter which is hugh in terms of per annum and if u r not planning to invest using their channel in future. (Pl check email sent by HDFC- at least they shown this courtsy – ICICI Bank will never do this)- Milind

  • R John Christy says:

    >Very Good Analysis. India Infoline still didn't charge anything for online MF transactions. Registration also free.
    Religare charges Rs.75 per transaction

  • hari vedanarayanan says:

    >Hi Deepak,

    I have been riding my bicycle to the cams office in the last 12 months.
    Reduces weight and also the fees.
    lol

    Hari

  • Business Pandit says:

    >Anyone with experience on fundsindia.com? Free is ok, but I have fears trusting them.

    For Kotak Securities / ShareKhan etc. which do not charge for MFs, there must be some annual charge to maintain the account, right? I presume they are online brokerages.

  • Anonymous says:

    >I have online account in Relainc money .. their % brokerage slab system works for me.. btw quite detailed information..

  • Nagendra says:

    >Hi Deepak,
    Have look at http://www.fundsupermart.co.in, seems good , but they have limited set of Banks and also a small set for AMCs for now , i guess