The battle for the online mutual fund business has got more intense. The impending launch of Paytm Money has led to countermoves by players such as Zerodha and Moneycontrol. Zerodha has announced the abolition of all charges for its mutual fund investment platform, Coin. Moneycontrol has launched the ‘Moneycontrol Transact’ app on Android to enable its users to buy mutual funds.
The Paytm plan
Paytm Money, the app-based mutual fund investment platform of Paytm is set to launch within the next 2-3 weeks. It is slated to offer direct plans (which have lower expense ratios than regular plans) and will operate as an investment advisor. Paytm will directly compete with online direct plan providers of mutual funds like Paisabazaar and Groww. It will also bring additional pressure on platforms providing relatively high-cost regular plans like ET Money and Scripbox.
Which provider to choose
Many investors worry about safety and ‘cheating risk’ when looking for a platform. Although this cannot be ruled it, it is important to note that online platforms (whether for regular or direct plans) do not hold your mutual funds. These records are held independently with third-party Registrar-and-Transfer-Agents (RTAs) like CAMS and Karvy. Hence, while selecting a provider, focus on the quality of the service provided and what you are being charged for it.
Regular plans will charge you 0.5%-1% more than direct plans in distributor commissions. However, this may be justified if you are getting a correspondingly higher level of service. Some direct plan platforms charge a fixed fee. You can compare this to the quality of service on offer.
This division is also replicated in the offline world. If you are investing through a bank, you will typically be put on a regular plan. If you have an investment advisor serving you, you may be given direct plans but charged a fixed fee.
In order to get a detailed overview of all your online investing options, you can read our comprehensive guide to online mutual fund investing here.