Choosing a platform, advisor or website for mutual funds can be tough given the sheer number of options on offer. In this article, we take you through them and give you the pros and cons of each. Different ones may suit the needs of different types of investors.
What if the platform goes out of business?
The online platforms or advisors do not ‘hold your money’ once your money has been invested. Your money is transformed into units of mutual funds. The records of your holdings are held by independent Registrar and Transfer Agents (R&Ts) or in demat accounts. A platform going out of business can be an inconvenience from the point of view of managing your investments but your money and holdings will not be lost.
Also unlike brokers, your mutual fund money goes straight from your bank account to the fund house or AMC and the redemption proceeds come straight back only to your bank account. In some cases, entities like MF Utilities, a distribution platform promoted by several AMCs under the aegis of AMFI, or BSE Star platform facilitate the transfer of money from investors to AMC. But such platforms cannot hold money on your behalf for long periods of time. It must either invest the money right away or return it to your bank account
That said, beware of rogue platforms which do not invest your money for the stated purpose, but this is rare.
Are they regulated?
Platforms will either be registered with the Securities and Exchange Board of India (SEBI) as mutual fund distributors (MFDs) or as Registered Investment Advisors (RIAs). Most will display the registration number and status at the bottom of the home page or in the FAQ section.
How does the money transfer happen?
Some platforms (like MF Utilities) will ask you to sign ‘bank mandates’ or ‘one-time mandates’ to let you transfer your money for mutual fund investments. These mandates will usually specify an upper limit such as Rs 1 lakh or Rs 10 lakh. Once the mandate is given, you don’t have to keep logging into net banking to authorise payments for your investments. In case of redemptions, your bank account will typically be linked to your mutual fund records and thus the money will be directly credited to your bank accounts.
How are fees/commissions usually charged?
Typically, if a platform offers regular plans, the fund house pays a commission of 0.5%-1% to the platform as your distributor. If it offers ‘direct’ plans, it may charge you a monthly fee. We have divided the online platforms on this basis, below.
Mutual Fund Utilities or MFU is a company owned by several fund houses (AMCs). It has an ‘aggregation’ feature which pulls all your existing mutual fund investments (online or offline) in one place, on its platforms. Do note that your investments with funds which are not part of MFU will not be ‘pulled in.’ However, this would be a small minority of funds.
Its interface is rather basic but it charges nothing (zero) for investing in direct plans. You can opt for regular plans, but it means you are investing through a third party distributor on MFU and it will pay out the commission associated with regular plans to the distributor.
Groww lets you pick your own funds or use one of the predefined ‘baskets’ of funds picked by Groww. It also lets you invest in direct plans. In such a case, the platform states that no fees will be charged.
Kuvera also lets you invest in direct plans and charges no commission for them. It allows you to set specific goals and look at funds suited to those goals. The platform’s website states that it may levy fees in the future for Portfolio Management Services (PMS) or Alternative Investment Funds (AIFs) but mutual funds will remain free.
Regular Plans only
FundsIndia founded as far back as 2009 is one of the largest online mutual funds distributors. It offers a robo advisory tool ‘Money Mitr’ and a specific individual advisor for you. It also offers stocks trading, a few corporate deposits and a debit card linked to your liquid fund investment. However, it only offers regular plans and not direct plans.
ETMoney is part of the Times of India Group (Times of India & Economic Times). It lets you track your fixed deposits, insurance and spending along with investing in mutual funds. However, only regular funds are offered, not direct ones. It also offers personal loans through this app in conjunction with RBL bank.
Nivesh.com is a platform for sub-distributors but it also allows you to buy regular plans online or on their Android app.
Aditya Birla MyUniverse is part of the Aditya Birla Group which also runs Aditya Birla Sun Life Mutual Fund. It also offers you personal loans and stock recommendations along with the option to invest in funds of different AMCs online. It also offers tools for tracking and payment of bills and expenses and setting up a budget. However, you can only invest in regular plans through this platform.
Scripbox actively picks funds for you based on your risk appetite and goals. It automatically rebalances these funds. However, the platform only lets you invest in regular plans.
ICICIDirect, Axis Direct, HDFC Securities and many others are traditional brokers which allow online investment in mutual funds. However, brokers usually offer only regular plans (with commissions). Also, brokers are used to stocks and stock traders and brokerage staff may sometimes push you to trade funds like stocks. This is not what mutual funds are designed for and you must be wary of such calls/solicitations.
Paisabazaar is a broad-based financial platform offering cards, loans, deposits savings accounts and mutual funds. It is part of PolicyBazar. Paisabazaar also allows you to invest in direct plans of mutual funds online. It also allows you to schedule a call with its representatives for mutual fund advice.
Mix of both
Discount Brokers focus on keeping costs low. In return, they do not offer you ‘free research reports’ or have relationship managers calling you. Prominent among them is Zerodha which has a mutual fund platform called ‘Coin.’ You can either buy regular plans which will pay Zerodha a commission or buy direct plans but pay a monthly fee of Rs 50. The fee applies if your mutual fund investments exceed Rs 25,000 in total value.
You can also buy mutual funds (direct plans and even regular plans) through the websites of several fund houses (AMCs). However, if you want to buy funds from different AMCs (and this is usually needed for adequate diversification), you will have to register multiple times with different fund houses. You will also have to give separate bank mandates.