Posted by: gowrisivaprasad | January 1, 2008

No entry load for direct investment in Mutual Funds

SEBI (Securities and Exchange Board of India), the market regulator in India, has issued a circular that asks all mutual fund houses to stop collecting any entry load (usually 2.25%) from all investors who invest directly with the fund house, via the internet or the fund house’s office/collection center.

This is effective from Jan 4th, 2008.

The exact modalities of how this will get implemented by various fund houses remains to be seen. So if you were planning to make some mutual fund investments in the next few days, hold on for a week or two, and ask the fund house for clarification on the process if you want to save on the entry load. If you use any bank’s demat or investment account you will still be inviting an entry load even though you are not going through an agent or broker. It pays to be wise and double check the process first.

I personally think you should be doing your own research and avoiding any broker recommendations. There is a wealth of information online to aid in the research. Value Research Online is an excellent resource that I use all the time.

Update: I was at a HDFC Bank branch today and asked them about this. The person I talked to said SEBI has removed all entry loads whether you buy through an agent or not. If you read through the SEBI circular it says SEBI is not abolishing entry loads everywhere. Clearly there is confusion in the system and not everyone is on the same page!

Update 2: I learnt today that the ‘Know Your Customer’ (KYC) rules state that even if you are allowed to invest in a mutual fund completely online, the mutual fund house still has to physically verify your PAN card before you invest. That throws a spanner into a pure online investing process. My recommendation would be to invest in mutual funds online through your bank’s netbanking site. Since the bank has verified your PAN there is no need to go through the verification process again and you can do it all online. Infact I did exactly that, a few days ago.

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Responses

I had mailed SBI and Sundaram BNP Paribas asking how to invest directly with them to avoid entry load. Here’re the responses:
——————————————————
SBI: We wish to inform that you can either invest online through our website http://www.sbimf.com or through our service centre for zero entry load.

We request you to kindly access the following link - http://www.sbimf.com/Downloads/Steps for Online Investment.pdf to view detailed instructions for using our online transaction facility. Primarily, you are required to have a Net Banking Account with any of these banks: State Bank of India, HDFC Bank, IDBI Bank, IndusInd Bank and UTI Bank.

You can submit the application form along with cheque and PAN card copy to our service centre. The addressess of our Investor Service Centres are available on our website http://www.sbimf.com
—————————————————
SUNDARAM: We wish to inform you that we do not offer an online purchase facility.

Our address in Bangalore is: …
——————————————————

By: parikshit on January 4, 2008
at 2:30 pm

Parikshit: Thanks for the information.

The URL for the list of Investor Service Centers for SBI is http://www.sbimf.com/contactus_location.asp

You can also buy SBI Mutual Funds through Citibank netbanking, but I am not sure if there will be an entry load or not.

By: gowrisivaprasad on January 4, 2008
at 4:08 pm

Does it hold same for NFO also?

By: Ganesh on March 6, 2008
at 11:44 am

Ganesh: NFOs are different. Load and expense structure of NFOs is different because fundhouses can include initial expense charges etc. So you might still have some of fees being charged for NFOs, even after this rule change. There is also no standard on what the expense charges are for various NFO, though SEBI has only mandated the maximum that the AMCs can charge.

By: gowrisivaprasad on March 6, 2008
at 12:14 pm

Best information I got, thanks
I am NRI from canada, want safe investment for my retirement, in mutual funds in india. I do not have knowedge about the best fund. information will be appricieated.

By: Multani on March 9, 2008
at 5:07 am

one person investing rs 50000 each year in eqt. mf .if he invest for 30 years and we assume expacted return 20%. what will be the differrence. He will invaste Rs 15 lac during 30 years and we belive that he has invested directly means without entry load.He will get 15 lac more after 30 years than who pays entry load.

By: Haresh jhagadiawala on March 15, 2008
at 7:58 pm

I WISH TO INVEST IN MFS THROUGH MY ON LINE TRADING PORTALS KOTAK SECURITIES OR RELIANCE MONEY

DO I HAVE TO PAY ENTRY LOAD?

By: rks bhatia on April 30, 2008
at 7:05 pm

Bhatia: yes, you will still pay entry load. ONLY if you invest directly with the mutual fund house through their website or by visiting their office do you avoid entry load. Any other bank web site or portal or agent or broker etc invites entry load.

By: gowrisivaprasad on April 30, 2008
at 7:59 pm

Dear All,

Actually I just invested in the AIG Gold Fund “Directly” and trust me it is straight forward. I read the blog at 12pm and I finished investing by around 2pm. I think this was quick turn around. It just will get better hence forth i guess. Just that you may have to invest 30 minutes for filling up the forms et al.. but it worth the effort. You know the process better and you are in control.

Thanks & Regards,
Dileep.

By: Dileep Mouleesha on May 13, 2008
at 3:53 pm

We can directly invest in all the mutual funds online. First go to their respective websites and download the form, fill it up and send to any india office along with cheque and copy of your PAN signed by you preferably to service center where chque is payble locally. Thats all. I sent various forms from uk, it reached Hyd office of SBI Mutual fund, ICICICPru, BirlaSunlife, SundanamBNP and they all reached in a 5 working days. On the same day they received they transacted and alloted a folio number. Good fund houses like Birlasunlife and ICICIPru give you PIN number by email so that you can buy on their website in addition to your monthly SIP. I buy units whenever there is a market crash, almost once in a week. This is in addition to monthly SIP which is auto debit which I committed for minimum of three years. If you want a consolidated statement of all funds then you can use a mail back service from http://www.camsonline.com website. There you don’t need any account/pin etc. Just put your registered email and get delivered inbox whenever you want 24/7. This really great. But camsonline only service some 10+ fund houses. Other service/registrar is Karvy computershare which also provide mailback services. Avoid icicidirect.com or other broker based purchase of mutual funds. If you need more help in applying please email me rk0956-subs@yahoo.com

Regard
RKG

By: R K G on July 3, 2008
at 9:39 pm

I have one doubt? How to check whether I have been charged entry load or not?

By: AD on July 20, 2008
at 12:34 am

While browsing through Sundaram’s site I came across so many application forms to download…

Application Forms
• Common Transaction Form - download
• Equity Application Form - download
• Equity Application Form for Printing - download
• Fixed Application Form for Printing - download
• SIP Application Form - download

How do I choose the suitable one for me?

By: AD on July 20, 2008
at 1:00 am

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