3 ways to buy mutual funds, directly

By Kapildeo Singh

The good news: Now, you can buy mutual funds directly from the fund house, instead of going through an agent, thus saving money on the entry load.

The entry load is a deduction made by the mutual fund company from your invested amount to pay the agent's commission.

So, if you choose not to use the services of an agent, you can save anything between 2 to 6% of your invested amount. Speaking in absolutes, let’s say you want to invest Rs 10,000 in a fund.

Before this latest announcement, the fund house would have deducted around Rs 200 and made a net investment of Rs 9,800 on your behalf. But now, if you choose to invest directly from the mutual fund house, your entire Rs 10,000 would be invested. 

How to buy directly from the fund house

Option 1: Locate the nearest office of the mutual fund house in your city.

Visit the office, fill up the form, submit the documents and voila, you have saved 2%.

Tip: Your bank does not double up as a branch office for the mutual fund house. The bank and the mutual fund house, inspite of belonging to the same group, are two different entities. For example, if you want to invest in a mutual fund scheme from SBI Mutual Funds, you cannot go to the nearest branch of the State Bank of India.

In this case, the State Bank of India will act as an agent for SBI Mutual Funds, and you will not save on the entry load. Instead, you should have gone directly to the nearest SBI Mutual Fund office. 

Option 2: Check for collection centres or investor service offices

Applications submitted to the collection centre or investor service centre will not be subject to entry load.

Tip: If the fund house does not have an office, collection centre or investor service office in the city, you may have to courier your form. If the cost of the courier is the same as the entry load, it would make sense to hire an agent and save all the trouble.

Option 3: Apply online

If you are Internet savvy, online is the way to go. You can buy any mutual fund of your choice by visiting the web site of that particular fund house. Here you will need to fill up your personal and investment details as asked in the application form and quote your Permanent Account Number (PAN), which is mandatory.

When investing online, you can pay through your bank account debit card, if that fund house has tied up with your bank. In case your bank account is not among the tie-ups, don’t worry.

There always plan B. You can choose to make the payment through a cheque/demand draft. In that case, you would need to courier the same. In case you are opting for an SIP, you can choose the Electronic Clearance Scheme (ECS).

Tip: Some fund houses do not offer SIP (Systematic Investment Planning) investments, online. You would have to go to a branch to do the same.

Agent or direct, what's better for you?

Dhirendra Kumar, CEO of Value Research says, “This move is controversial but progressive. It will empower retail investors. But it makes sense to those who do not seek advice and service from their agents.”   

That means, if you are a savvy investor and do not need the advice of an agent to know which fund is best for you, the direct route is a blessing. However, if you need that little bit of help, it’s always better to choose an agent and invest in the right fund.

After all, no point trying to save a few rupees and end up making a bad investment. Also remember, that an agent will take care of all the paper work and will also be around if you need help at redemption.

So, choose the route that works the best for you.

You need to submit these documents: