Invest online for transparency,safety

Mutual funds have been a preferred route for retail investors who are not very keen on directly investing in stock markets. Until market regulator Sebi banned entry loads on mutual funds last year,these were largely sold by distributors of the fund houses across the country.

Mutual funds have been a preferred route for retail investors who are not very keen on directly investing in stock markets. Until market regulator Sebi banned entry loads on mutual funds last year,these were largely sold by distributors of the fund houses across the country.

However,distributors no longer find it lucrative to sell mutual fund products as their margins have shrunk. Under the latest rules,investors have to pay a mutually agreed amount to an agent for the advice he/she gives for selling a product. These initiatives will go a long way in empowering retail investors as they will have the freedom to directly negotiate on the fee to be paid,based on the services rendered by distributors while purchasing mutual funds. Moreover,these steps are also expected to provide an impetus to online and automated approaches to mutual fund transaction processing by retail investors.

Earlier,entry load was deducted by the mutual fund or the asset management company from the investment amount and passed on to the mutual fund agent. Considering that mutual funds are more like a push product and investors are not willing to pay a fee for the service,distributors are now pushing other investment products with higher margins. In fact,the heavy dependence on distributors has affected the growth of the mutual funds industry,which has a customer base of about 5.3 million. According to experts,the industry now needs to directly reach out to potential investors like the fast-expanding middle-income group.

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Also,a recent news of Rs 2-crore embezzlement by an employee of Jabalpur-based mutual fund distribution agency registered with the Association of Mutual Funds in India was disturbing. The employee had forged the documents of several investors,deposited the cheques and cash in his own name and redeemed the investment within days. Though Amfi has suspended the agencys registration,the issue of investor safety cannot be ignored.

In this backdrop,investing in mutual funds online could be safer and more transparent. Distributors are also looking at an online medium for a more efficient and cost-effective way to process large transactions. Also,with around 40 asset management companies and hundreds of schemes to choose from,it is exhausting to choose a scheme that best suits his needs.

An investor can buy/sell mutual funds online in the same way as he/she buys equities through the National Stock Exchange or the Bombay Stock Exchange. To start with,get yourself registered with websites like fundsindia.com. Many fund houses offer direct online services. After you log on to a website,select the fund house you would like to invest in. All the schemes of the fund house would be displayed. Select the scheme you would like to invest in. Then choose the amount you wish to invest and make an online payment via your credit card or bank transfer. The details of your transactions will be immediately updated in your order book and your portfolio will be displayed after the order is processed. The fund house will send a successful investment confirmation mail.

On the other hand,if you plan to go through an agent who also offers online investment option,you have to register with him by filling the required form with the KYC documentation. Once done,you can buy and sell your units via your broker and the units will be credited into your demat account.

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Now,if you plan to redeem your investment,click on the ‘sell’ option in the trading section. Select the fund house and see all the schemes available for redemption from the fund house. Select the scheme you wish to sell. Next,choose the amount indicated and the money is redeemed.

Experts feel that online investment will pick up across the country as investment sentiment starts picking up. In fact,a recent study shows that regular internet users are growing at an annual rate of 10% every year in the country. More than 75% of users belong to the consuming and aspiring class and a sizeable portion of them is exposed to transactions through credit cards,internet banking and trading shares online. The numbers are bound to grow and fund houses will have to tap this route more aggressively.

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