Recently, when I wrote blog posts like “Top 10 Best Mutual Funds to invest in India for 2015” and “How to invest in Mutual Funds in India online?“, I found too many quarries asking me whether online mutual fund investment in India is really a DIRECT investment?
Before proceeding further, let me share a video shared by Mr. Srikanth Shankar Matrubai on one Whatsapp advisory group. This video was created by another fellow adviser, Mr. Ramesh Bhat.
In this video, you notice that www.moneycontrol.com reflecting the direct plans. Once you click on “Invest online” tab, and then DIRECT will disappear. In that place normal plan with money control ARN will be available on individual mutual fund company online purchase site. If you do not notice this then there is a high probability that you end up in buying normal plans than direct plans.
I am not stating that moneycontrol is doing anything wrong. However, highlighting the fund name of DIRECT but redirecting the visitors to normal plans is completely misguiding.
Next comes the online portals. These days, even a small adviser offers you online mutual fund buying platform from his site. So buying online with these online portals will not be DIRECT option. Instead, it will be normal funds only. Whether this online platform is your demat account provider, banks, some online portals, few advisory firms or an individual.
Please keep in mind that except mutual fund companies NONE of the intermediaries selling you DIRECT plans. Therefore, to earn the benefit of DIRECT plans, you have only option is to invest through mutual fund companies directly. If someone is offering you online platform, then you must keep in mind that it is not DIRECT plan, but a regular plan where he earns trail and upfront commission on your investment.
This is not the case with mutual funds alone. You find few insurance brokers, aggregators (a site that compares your insurance need and select a product for you) and few financial planners also who really push online term insurance of the particular company ONLY. You feel that you are buying online, but there again, these intermediaries earning commission on that. So never ever, heed if someone tries to push you any particular product. Whether he is fee based financial planner or fee only financial planner.
Buying ONLINE or DIRECT option is not so worry free or cost effective. The risks are there at every stage. So be cautious while buying mutual funds in DIRECT mode or life insurance through online mode.
Hope this update will clear your doubts about online buying of mutual funds and a small caution about online term insurance buying 🙂