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.

About these ads

Responses

  1. 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: …
    ——————————————————

  2. 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.

  3. Does it hold same for NFO also?

  4. 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.

  5. 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.

  6. 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.

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

    DO I HAVE TO PAY ENTRY LOAD?

  8. 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.

  9. 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.

  10. 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

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

  12. 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?

  13. Hi there,

    If you open the application form/offer document then it will say on what name the cheque should be issued. For example in SBI funds, if you are opting for contra fund the offer application/document says that write a cheque in favouor of ‘SBIMF -MSFU Contra Fund’ also in Sundaram BNP Paribas funds, write a cheque in favour of ‘SUNDARM BNP PARIBAS Select Midcap Fund Apreciation. this is just a example.

    To know who is offering online facility after mandatory first time paper purchasing you have to see individual websites of all mutual funds. So far I know are 1)BirlaSunlife 2)ICICIPRU 3)Franklin Templeton 4)Kotak 5)SUNDARAM BNP PARIBAS (from 23rd July 08 through camsonline.com, for this you need to send a letter to camsonline to get a pin number, form can be found on camsonline.com) 6) SBIMF but this is utterly useless, most horrible online service I never saw and still you have send form after online purchase.

    For that query put by AD about the application form you should use Equity Application Form for Printing, and SIP application form. In fact all are same. But some companies will add automatically a application number to pdf form when you download this is usefull if want to trackdown. Also all the applicaitons forms from all the fund houses are desingned to have same nomenclature, style, laout, wording etc. If in doubt compare the forms and phone their toll free customer service number if don’t understand anything on the form.

  14. Below was my reply to a email query I received last week about buying online kotak funds.

    First download application form http://www.kotakmutual.com, fill it up and and send this form along with 1)Cheque 2)A blank cheque3)Copy of attested Pancard to local Kotak Mutual office i.e. where you cheque is payble i.e. if you live in Bombay then can’t send to a Delhi office. I have NRI account in Hyderabad so I sent the form with cheque to Hyderabad office. A blank cheque is nothing but a cheque just write in bold letters that as ‘CANCELLED’ in the paye space. Thats it. The form is simple but read the instructions page to understand it otherwise go to local Kotak mutual office they will instruct you. But don’t go to any other broker/bank etc. If you go to them they will write their Broker code in the form and it will attract entry load. In the form you have write as ‘Direct’ in space for broker code/sub broker code. In the form you have to give email id then once cheque is realised then they will transcat and allocate a folio number and give you a email confirmation. Once a Folio number is allocated you can go to http://www.Kotakmutual.com and go to ‘Online Transaction’ page then you can register and then do buy/sell of units as you buy shares in addition to normaly monthly SIP. I have SIPs in various funds but whenever market goes down I buy some units this way I accumulate cheap units.

    Please drop a response post if you find my posts usefull or have any comments.
    rk0956-subs@yahoo.com

  15. One more

    The units are not shares, so there is no concept of paper/demat form. You are just given a folio number similar to account number. You can opt for paper statment which all companies send every fourth months. But they send it to only indian address. Or you can just opt for Email only account which is convienient for NRIs.
    If can’t believe them then opt for paper statement. And apply in person for the first time transaction with cheque, that way you get a receipt initially called ‘Transaction Slip’.

    Thank you rk0956-subs@yahoo.com

  16. Below was my reply to a email query I received last week about buying online kotak funds.

    First download application form kotakmutual.com, fill it up and and send this form along with 1)Cheque 2)A blank cheque3)Copy of attested Pancard to local Kotak Mutual office i.e. where you cheque is payble i.e. if you live in Bombay then can’t send to a Delhi office. I have NRI account in Hyderabad so I sent the form with cheque to Hyderabad office. A blank cheque is nothing but a cheque just write in bold letters that as ‘CANCELLED’ in the paye space. Thats it. The form is simple but read the instructions page to understand it otherwise go to local Kotak mutual office they will instruct you. But don’t go to any other broker/bank etc. If you go to them they will write their Broker code in the form and it will attract entry load. In the form you have write as ‘Direct’ in space for broker code/sub broker code. In the form you have to give email id then once cheque is realised then they will transcat and allocate a folio number and give you a email confirmation. Once a Folio number is allocated you can go to http://www.Kotakmutual.com and go to ‘Online Transaction’ page then you can register and then do buy/sell of units as you buy shares in addition to normaly monthly SIP. I have SIPs in various funds but whenever market goes down I buy some units this way I accumulate cheap units.

  17. Thank you RKG for giving valuable infomation about investimg in MF.

  18. Here is another good article:

    http://www.pankajbatra.com/2008/09/05/mutual-fund-investment-with-zero-entry-load/

  19. Hi RKG
    Do you need to commit to SIP to get online PIN or as long as you invest once by filling form you can get online PIN and than can invest online as and when you like without SIP committment

  20. Hi

    I would like to buy tax saving MFs. But I would prefer to have them in my portfolio without having paid the entry Load.

    Can you tell me how to buy them. I tried through ICICI direct, but they did charge some entry load( may be the brokerage )

    Can you pls put some light in that reference. You can email me samip2u@gmail.com

    thanks
    Sandipta
    samip2u[at]gmail[dot]com

  21. I went to a Karvy office (Karvy finapolis) here in Kolkata, asked for a DWS form (for which Karvy is the registrar) and I was told that they would put an ARN no. That is, not a direct investment and I would pay 2.25% entry load. I asked if there was any Karvy office in Kolkata where I could make a direct investment. They said no.

    As a result I have not invested in any of the funds registered with Karvy — since I can just walk into a CAMS office and invest in their funds without paying the entry load.

    Has anyone invested at a Karvy office without paying an entry load? Any idea/suggestion on how to do it? Thanks.

    Amitabha

  22. My answer to a query by M P on September 12, 2008.

    You get online PIN once you get folio number no matter SIP investor or One time investor. For exambple I got a pin for Birlasunlife MF when I invested once in their Frontline Equity fund and now I received pin so now investing in market dips.

  23. My answer to Amitabha on October 12, 2008.

    If you want entry load free investment go to Fund Houses only. Everywhere else there is fee. The basic logic is that a distributor prints with his own expenses in the hope that investor will use their forms with their Broker code and they will get the commison from fund houses. Basically he is investing in printing the papers also he is offering the service of investment advice which has been seen as a free service in india.

    One example of above that I recently in Hyderabad and visited SBIMF office with some personal work. I surpsised to see that there are loads of application forms lying at the reception for people to pickup for free but all the forms got Broker code/ARN number of Andhra Bank. That means Andhra Bank a mutual fund distributor has printed off those forms and kept them in the SBIMF office. Wonder ! Atleast SBIMF should have printed off the forms and given it to people with code and free.

  24. thanks for information , ok carry on


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: