As per guidelines of Securities & Exchange Board of India (SEBI) via this circular, no entry load (usually 2.25%) shall be charged for direct applications received by the Asset Management Company (AMC) i.e. applications received through internet, submitted to AMC or collection centre/ Investor Service Centre that are not routed through any distributor/agent/broker.
Also apart from that, SEBI has also removed entry load from all mutual funds from August, 2009. There will be no entry load on any mutual fund schemes from now on. Distributors will now have to disclose commission for schemes.
If you are making investment in MF (lump-sum or SIP) and you route your application through a broker (online trading accounts like Kotak, ICICI direct etc.) or agents, You can be charged service fees or brokerage other than the application amount.
To avoid paying the commission/brokerage or service fees, you now have to invest directly with the Mutual Fund i.e. you have to submit the form directly to the Mutual Fund without the assistance of any agent/distributor. Mutual Funds bought through sites like ICICI direct, India info line, Kotak securities would also be considered as investment through brokers. You may be charged service charge on these investments.
It shall also be applicable to additional purchases done directly by the investor under the same folio and switch-in to a scheme from other schemes if such a transaction is done directly by the investor.
What is entry load? Suppose you decide to invest in MF. Say the price (in Mutual fund jargon it is called Net Asset Value or NAV) of one mutual fund unit is Rs 10. And the entry load is 1% then you would have to pay Rs 10.10 for one unit of Mutual Fund. See this to understand how much each MF equity scheme charges as front load. Most charge 2.25% so you end up paying Rs 10.225/- per unit.This load charges is used for meeting marketing, selling and distribution expenses. Or in a nut-shell this money goes to your broker. Now as we know, brokers are making more money than the mutual funds themselves. So it means most MFs are using brokers as the way to sell their schemes.
If you can choose your fund. All you need to do is fill the form and send it to concerned AMC/ Investor service center to save on the entry load.
Now question comes how to apply directly to the AMC.
Download the mutual fund form from the AMC website. Take a print out, fill the form and submit to your nearest CAMS or Karvy Investor centre along with copy of PAN card, SIP form(if required) and cheque. Please find the download links for all the AMCs below.
ABN AMRO Mutual Fund
AIG Global Investment Group Mutual Fund
Baroda Pioneer Mutual Fund
Benchmark Mutual Fund
Bharti AXA Mutual Fund
Birla Sun Life Mutual Fund
Canara Robeco Mutual Fund
DBS Chola Mutual Fund
DWS Mutual Fund
DSP Merrill Lynch Mutual Fund
Edelweiss Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
Franklin Templeton Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
ICICI Prudential Mutual Fund
IDFC Mutual Fund
ING Mutual Fund
JM Financial Mutual Fund
JPMorgan Mutual Fund
Kotak Mahindra Mutual Fund
LIC Mutual Fund
Lotus India Mutual Fund
Mirae Asset Mutual Fund
Morgan Stanley Mutual Fund
PRINCIPAL Mutual Fund
Quantum Mutual Fund
Reliance Mutual Fund
Sahara Mutual Fund
SBI Mutual Fund
Sundaram BNP Paribas Mutual Fund
Tata Mutual Fund
Taurus Mutual Fund
UTI Mutual Fund
Investing online with zero entry load/service charge/brokerage:
For investing online on mutual fund’s websites, you need to have HPIN for that particular AMC. If you are already invested in any of the scheme of an AMC, you may fill PIN form and submit to nearest investor centre to get the PIN generated. Also If want PIN generated for your new investment don’t forget to check the online transaction option in mutual fund application form. After PIN generation, you can transanct online on AMC websites.
You may find PIN form for various AMCs in the downloads section of the website. Some of the AMC like ICICI, Birla also provide instant generation of PIN without any paperwork. Also please find below websites of AMC where you can login and buy, transfer and redeem mutual funds online.
Kotak Mutual Fund
Birla Sun Life Mutual Fund
Principal Mutual Fund
DSP BlackRock Mutual Fund
Reliance Mutual Fund
SBI Mutual Fund
HDFC Mutual Fund
ICICI Pru Mutual Fund
Franklin Templeton Mutual Fund
Fidelity Mutual Fund
UTI Mutual Fund
CAMS Online Transaction Service
Karvy Online Services
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View Comments
This site is really informative for first timers like me.
Hi, Mr. Pankaj,
Let me know How Capital gain is calculated for SIP.
@Mani
Capital gain on SIP is calculated on monthly basis. Lets say you bought X units at P price in a month and sold them at Q price then capital gain for those units will be (Q-P)*X.
Similarly you can compute the gain for all SIP month and add all to make total capital gain.
On Equity mutual funds, income tax on capital gain is zero, if they are kept for more than one year.
Hey Pankaj,
I was actually new to this Mutual Fund world….Not anymore thanks a bunch to your blogs
Need some advice from you……
I just started 3 SIP’s with ICICI (Tax Plan Growth), HDFC (Tax Saver Growth), Reliance (Reliance Long Term Equity Fund) Rs 2000. My Agent charged me Rs 2000 for each Plan…..In total Rs 6000 for 3 Plans.
Now Questions:
First: It appears to me that I charged a lot as I could have done it by myself.
Second: Are these good funds??
Third: I want to invest in some more mutual funds let me know which one do you think I should go for……..???
Well that’s it for now….Please reply as per your convenience…If possible CC me on my email id manish22981@yahoo.com
Regards
Manish Tomer
@Manish
Thanks for showing trust.
First of all, I think, Agent must have charged 6000 towards first SIP check for the investment and not for his commission. All this amount would be invested in your folio. Please confirm the same from agent. Charge from agent cannot be so high.
1. As of now, Mutual funds do not have any entry load, so there is not much difference by investing directly by yourself or though any agent, until and unless agent asks for any service fees.
2. These all are good funds.
3. Other good tax saving funds are : Canara Robeco Equity Tax Saver, HDFC Taxsaver, Franklin India Taxshield, DSPBR Tax Saver, Fidelity Tax Advantage and
Sundaram BNP Paribas Taxsaver.
Among Equity diversified, good funds are Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund , ICICI Pru Discovery Fund, Sundaram Select Midcap, HDFC Equity Fund and Sundaram S.M.I.L.E Fund
To know about Growth, dividend and dividend reinvestment modes, please read this post: http://www.pankajbatra.com/finance/growth-dividend-payout-reinvestment-mutual-fund-investment-options/
Thanks for your precious time & Information Mate!!!.. I asked the same question to my Agent about dividend & Growth couple of days ago haven't heard back from him :-(
Just so that you know I live in Canada.....will be in touch with you as i have some plans to invest in India. I just visited India and thats when i asked my younger bro. to invest in Mutual Funds.
What do you think about this: I have a line of credit here on which i only have to pay 3-4% annually.....Do you think its wise to use my line of credit and then invest in mutual funds in India??
Regards
Manish Tomer
@Manish
As of now, Investment in any emerging market will give better return than in US/Canada. Mutual fund and stocks in India, will give more than 12-15% in a longer run.
It make sense to invest in India from your credit in Canada. But also make sure that all taxation rules are followed as an Non-resident Indian.
Hi Again Pankaj,
Also please explain me Growth & Dividend Option for Mutual funds
Regards
Manish Tomer
Hello Pankaj,
Please suggest how much I have to pay for SIP if I plan to buy units of 5000 Rs each month.
I heard City Bank doesn't charge for this, is it true?
Ashish sharma
@Ashish
As of now there is no entry load charged on buying mutual funds. But some online trading websites or agents may charge towards service fees.
There are different options available where there is no extra charges. If you apply directly to mutual fund company (AMC) or through sites like fundsindia.com and fundsupermart.co.in. Some banks like Citibank also offer it for free as they earns from commissions from AMC.
Read this post for more details: http://www.pankajbatra.com/india/how-to-transact-mutual-funds-online-directly/
hello Pankaj,
I want to invest for 30 years in mutual funda through SIP.Monthly contributioon would be 20000 per month with 10% increase in investment every year.
I have read few articles that portfolio has to be very diversified to have huge gain in long term(as even a single percentage more on huge corpus would fetch huge difference -specially between 20 and 30th years)
So i wld like to include, blue chip,diversified( only groth funds), 1 index fund, 1 mid cap,1small cap(very high risk fund), 1 category fund(which should be that banking,infrastructure..etc) and 1 fund investing in emerging markets(like brazil,china etc).Like this for 15 years....then less risky funds(mostly balanced funds) until 25th year and then no risk funds for last 5 yr.My target is to raise around 7 crore after 30 years.Please suggest.
@Kapil
Your planning towards future seems impressive.
Its pretty long term and needs review (exit and re-invest) of planning every five years as economies/industries keep changing in this interval.
For now, you can start your investment in mutual funds from following:
Diversified Large cap: Birla Sunlife Frontline equity fund, HDFC Top 200 Fund, DSP Backrock Top 100 fund, Reliance Regular Savings – Equity, ICICI Pru Discovery Fund
Small/Mid cap: DSP Blackrock small and midcap fund, Sundaram Select Midcap, HDFC Equity Fund, Sundaram S.M.I.L.E Fund
Dear Pankaj,
Please correct me if I am wrong. (1) ICICI direct does not charge any service charge for investing in Liquid Funds. (2) ICICI direct does not charge any service charge for switch out and switch in. So I buy the best performing Liquid Funds of HDFC, BIRLA & IDFC in Lump SUM say 1.0 Lacs each. Now as per the market conditions I switch out to the best performing Div Eq fund of respective funds. This way I donot pay any service charges to ICICI. Also do not keep any idle money. What do you say?
@Manoj
Frankly, I have not used ICICI direct, so won't be able to comment on their service charges etc.
But their mutual fund FAQ page shows the charges here: http://icicidirect.com/mffaq.asp
Regarding switch out and in, You can try doing it for small amount and see if they charge any service fees for the same. If it works w/o charges you may continue doing so.
I started with SIP in IDFC Premier equity and IDFC SME through a broker from October 2011 (I did not pay any service fees to him). If no entry load was charged by fund house then why broker still sell these schemes (in case they are not charging any service fees).
@Ajay
Mutual fund companies or Asset management companies (AMC) pays commission to agents. For IDFC its 0.50% per upfront and 0.10 to 0.80 (depending on fund) trailing.
Thanks for the prompt reply. So essentially we are not getting charged for any transactions through brokers in case broker does not charge any service fees. It is the arrangement betweeen AMC and broker, right?
@Ajay
Yes, in case broker/agent does not charge service fees, there is no overhead of investment done through them.
Its an arrangement between AMC and agent.
Mutual fund companies pays commission to agents to popularize their products and increase their AUM (assets under management).
HI Pankaj,
i want to invest in Mutual Fund for the first time.from the review i found HDFC Top 200, HDFC Taxsaver....
can u suggest is this good time to invest in below SIP ??
HDFC Top 200 (Rs:1000)
HDFC Tax Saver(Rs:1000)
@Basav
Its always right time to start SIP as cost of buying is averaged out.
HDFC top 200 is a good fund and you can go ahead with it.
But HDFC tax saver would be beneficial this financial year only as from next year, under direct tax code, tax saving mutual funds won't carry tax benefit.
MR PANKAJ
now a days icici bank provides a facility like.. you can buy MF from icici bank net banking, they are attach a new column for MF.
you can buy MF from there online
does that means they take some extra charges for that like (commission and other).
is there any drawback.
@Ravi
In case they are not charging anything extra in terms of commission, service charge etc, then there is no harm in buying through them.
Dear Pankaj, went through your blog. Really informative. I have a question:
I have a demat ac with sharekhan which I use to buy bonds and equities. Now I am planning to invest 20K in ELSS for tax saving purpose. But I am not sure about the brokerage they would be charging. Their commission disclosure document mentions 2 types of commissions: 1) Upfront category and 2) Annulised Income. For ELSS these are 0/5/1.89 and 0/1/25/0.28 (as min/max/avg). What does this mean? Should I go directly to banks like HDFC to buy the MF to avoid charges? Please advice.
@Anand
Commission is paid to broker firm by mutual fund house, it won't be deducted from your investment.
However, when you are applying for tax saving mutual funds, broker firm may charge service fees or brokerage. It will be shown you when you try to buy units. You can check it there itself online.
If you want to invest directly or don't want to bear any extra charges, please go through this post: http://www.pankajbatra.com/india/how-to-transact-mutual-funds-online-directly/