1. Beginning the Journey
Today I an beginning the journey of diversifying my finances into non-fixed returns world into direct mutual funds.
I have just started scratching small inputs from friends and family and capturing the 1st level of pointers here.
Note: This is 2018 analysis, some of the information mentioned here may have changes, however gist remains the same
Credits
I would like to acknowledge the insight provided by my brother (Dr Neeraj Agarwal) and friend (Deepak Kumar Prasad) which helped me building this blog.
Mutual Funds Based on Structure
Open Ended Funds
These mutual fund investment instruments deals with units that are purchased or redeemed throughout the year. Such purchases or redemption are done by persisting Net Asset Value (NAV). These funds offer liquidity to the investors, so they are preferred by the investors.
Close Ended Funds
These mutual fund investment instruments deals with units that can be purchased during initial period only. The units are eligible for the redemption on a specific maturity date. In order to provide liquidity, these schemes are listed on the stock exchange for trading purposes.
Category of Mutual Funds
Equity Funds
These funds are invested in equity stock or shares of the companies. These are considered high-risk funds but also tend to provide high returns.
Large Cap
Funds invest mostly in big companies. Funds identify these companies by their market capitalisation. These companies are considered safe to invest because they are likely to be well-established players and leaders in their respective filed. This is the reason why largecap funds are considered suitable for conservative equity investors. These funds are likely to offer modest returns as they carry relatively less risk.
Mid Cap
Funds invest mostly in medium-sized companies. These companies can be risky as they may or may not realise their full potential. However, if they succeed, they will become large companies and investors will be rewarded handsomely. Investors with high risk appetite should bet on these funds.
Small Cap
Funds invest in small companies. These companies can be extremely risky, as there will be very little information about them available in the public domain. However, they can also offer phenomenal return. They are suitable only for investors with a very high risk appetite.
Hybrid or Balanced Funds
Balanced equity-oriented hybrid funds invest a mix of equity (at least 65 per cent of the corpus) and debt. These schemes are less volatile than pure equity funds because of the mixed portfolio. The debt investments provide stability in times of volatility. These funds are suitable for new stock investors and very conservative equity investors.
Sector Funds
Funds invest mostly in a particular sector or along the lines of a defined theme. Since the investments are concentrated on a single sector or theme, sector funds are considered extremely risky. It is very important to time the entry into and exit from them as the fortunes of sectors changing in different cycles in the economy. They are meant for investors with an intimate knowledge about a particular sector. Investors should take only a small exposure in them.
Tax-Saving Funds
Funds offers tax benefits to its investors looking to save taxes under Section 80 C of the Income Tax Act. Investments in these funds qualify for a tax deduction of up to Rs 1.5 lakh. The funds are invested in equities thereby offering long-term growth opportunities. Tax saving mutual funds (called Equity Linked Savings Schemes) has a 3-year lock-in period. They are considered high on risk but also offer high returns if the fund performs well.
Debt Funds
These funds are invested in the debt like government bonds, company debentures, and fixed income assets. As they provide fixed returns, they are known to be safe investment instrument.
Exploring the platform to invest into mutual funds
Platform Primary Requirements
Buy Direct Mutual Funds
Sell Direct Mutual Funds
Support for SIP, STP, SWP, Lumpsum investment
Portfolio Dashboard graphical view
Zero MF management charge
Low or Zero recurring platform charge
Investment control from outside the MF platform (iff MF platform is closed, your investment management should have zero impact)
Introduction
Mutual fund houses, from their side, have also launched their own website applications where you can track, and invest in their schemes. You will have to register separately with each mutual fund thus creating many User IDs and passwords.
Then there are the Registrar and Transfer Agents (RTAs) who take care of the transaction processing for various mutual funds. Basically, when you invest in a mutual fund, it is likely that the processing of the transaction is going to be done by one of the RTAs. They also offer Investor Services for the customers of the mutual funds. There are 4 major RTAs – CAMS, Karvy, Franklin Templeton and Sundaram BNP Paribas. They offer online and mobile investing solutions which can be used by investors and distributors.
Final Verdict
Invest and track using Kuvera. (Its free. Both App and Website)
Create an account both at CAMS and KARVY as shared below. All above requirements would get fulfilled.
This would have zero cost for Mutual Fund Platform (buy\sell or platform charges)
Pros
Buy Direct Mutual Funds (Support for SIP, Lumpsum investment)
Sell Direct Mutual Funds
Option to set investment goals (Own a House, Retire Easy) and track progress.
Portfolio Dashboard graphical view
Zero MF management charge
Zero recurring platform charge
Consolidated statement across fund houses (CAMS and KARVY) could be generated. This statement could be uploaded at Value-Research or other monitoring sites to have additional dashboard view.
Mutual Fund purchased from AMC website is visible at Kuvera by importing consolidated statement
Mutual Fund bought at Kuvera could also be sold from Mutual Fund AMC website and also visible at AMC website
For buy, Fund transfer happens directly from buyer bank account to Mutual Fund. Kuvera doesn't hold any intermediate fund.
For sell, Fund transfer happens directly from Mutual Fund to seller bank account. Kuvera doesn't hold any intermediate fund.
Platform like CAMS and KARVY could also be used to transact and visualize Mutual Funds bought from Kuvera
Has online option, and validation and account activation takes ~0 days.
Graphical investment overview is available
Compare analytics (a key differentiator for kuvera) is available
Cons
None, I am aware of.
Account @ Kuvera
Follow New User Registration and open the account using unique code 0BD3G .
Kuvera recommend you get eKYC compliant through Quantum AMC. It is a completely online process and Quantum AMC offers it for no cost to the investor.
Cental KYC could be done by submitting cKYC filled form at CAMS office in your city. * cKYC removes Rs.50,000/- per financial year per Mutual Fund
Supported Mutual Fund Houses @ Kuvera
AXIS
BARODA PIONEER
BHARTI AXA
BIRLA SUN LIFE
BNP PARIBAS
CANARA ROBECO
DHFL PRAMERICA
DSP BLACKROCK
EDELWEISS
HDFC
HSBC
ICICI PRUDENTIAL
IDBI
IDFC
IIFL
INDIABULLS
INVESCO
KOTAK MAHINDRA
L&T
LIC
MAHINDRA
MIRAE ASSET
MOTILAL OSWAL
PEERLESS
PPFAS
PRINCIPAL
QUANTUM
RELIANCE
SBI
SUNDARAM
TATA
TAURUS
UNION
UTI
MyCAMS
Pros
Buy Direct Mutual Funds (Support for SIP, STP, SWP, Lumpsum investment)
Sell Direct Mutual Funds
Portfolio Dashboard graphical view
Zero MF management charge
Zero recurring platform charge
STP and SPW are available
Consolidated statement across fund houses (CAMS and KARVY) could be generated. This statement could be uploaded at Value-Research or other monitoring to have dashboard view.
Mutual Fund purchased from AMC website is also visible at MyCAMS
Mutual Fund bought at MyCAMS could also be sold from Mutual Fund AMC website and also visible at AMC website
For buy, Fund transfer happens directly from buyer bank account to Mutual Fund. MyCAMS doesn't hold any intermediate fund.
For sell, Fund transfer happens directly from Mutual Fund to seller bank account. MyCAMS doesn't hold any intermediate fund.
Third-Party Platform like Wealth Trust could also be used to transact and visualize Mutual Funds bought from MyCAMS
Has online option, and validation and account activation takes ~0 days.
Cons
Some Mutual Fund House not available (Mostly all remaining Fund Houses are available at Karvy), so this limitation is addressed by having account both at CAMS + KARVY
No Option to set investment goals (Own a House, Retire Easy)
Account @ MyCAMS
Follow New User Registration and open the account
eKYC is also available during Registration. * Investment under this route cannot exceed Rs.50,000/- per financial year per Mutual Fund.
Cental KYC could be done by submitting cKYC filled form at CAMS office in your city. * cKYC removes Rs.50,000/- per financial year per Mutual Fund
Supported Mutual Fund Houses @ MyCAMS
Aditya Birla Sun Life Mutual Fund
DSP BlackRock Mutual Fund
HDFC Mutual Fund
HSBC Global Asset Management
ICICI Prudential Mutual Fund
IDFCMutual Fund
IIFL Mutual Fund
Kotak Mutual Fund
L&T Mutual Fund
Mahindra Mutual Fund
PPFAS Mutual Fund
SBI Mutual Fund
Shriram Mutual Fund
TATA Mutual Fund
Union Mutual Fund
KARVY
Pros
Buy Direct Mutual Funds (Support for SIP, STP, SWP, Lumpsum investment)
Sell Direct Mutual Funds
Portfolio Dashboard graphical view
Zero MF management charge
Zero recurring platform charge
STP and SPW are available
Consolidated statement across fund houses (CAMS and KARVY) could be generated. This statement could be uploaded at Value-Research or other monitoring to have dashboard view.
Mutual Fund purchased from AMC website is also visible at Karvy
Mutual Fund bought at Karvy could also be sold from Mutual Fund AMC website and also visible at AMC website
For buy, Fund transfer happens directly from buyer bank account to Mutual Fund. Karvy doesn't hold any intermediate fund.
For sell, Fund transfer happens directly from Mutual Fund to seller bank account. Karvy doesn't hold any intermediate fund.
Third-Party Platform like Wealth Trust could also be used to transact and visualize Mutual Funds bought from Karvy
Has online option, and validation and account activation takes ~0 days.
Cons
Some Mutual Fund House not available (Mostly all remaining Fund Houses are available at CAMS), so this limitation is addressed by having account both at CAMS + KARVY
No Option to set investment goals (Own a House, Retire Easy)
Account @ Karvy
Follow New User Registration and open the account
eKYC is also available at Aadhar based eKYC. * Investment under this route cannot exceed Rs.50,000/- per financial year per Mutual Fund.
Central KYC could be done by submitting cKYC filled form at Karvy office in your city. * cKYC removes Rs.50,000/- per financial year per Mutual Fund
Supported Mutual Fund Houses @ Karvy
Axis Mutual Fund
Baroda Pioneer Mutual Fund
BOI AXA Mutual Fund
Canara Robeco Mutual Fund
DHFL Pramerica Mutual Fund
Edelweiss Mutual Fund
Essel Mutual Fund
IDBI Mutual Fund
India Bulls Mutual Fund
INVESCO Mutual Fund
JM Financial Mutual Fund
LIC Mutual Fund
Mirae Asset Mutual Fund
Motilal Oswal Mutual Fund
Principal Mutual Fund
Quantum Mutual Fund
Reliance Mutual Fund
Taurus Mutual Fund
UTI Mutual Fund
MFUtility
Cons
Some Mutual Fund House not available e.g. Mirae (Mostly all remaining Fund Houses are available at CAMS+KARVY).
Has online eCAN account option, however post that validation and account activation takes more than 10 days.
No Option to set investment goals (Own a House, Retire Easy)
Account @ MFUtilty
Follow eCAN Registration for individual investors and open the account
Supported Mutual Fund Houses @ MFUtility
Aditya Birla Sun Life
Axis Mutual Fund
BNP Paribas Mutual Fund
Canara Robeco Mutual Fund
DHFL Pramerica Mutual Fund
DSP Blackrock Mutual Fund
Edelweiss Mutual Fund
Essel Mutual Fund
Frankin Templeton Mutual Fund
HDFC Mutual Fund
ICICI Prudential Mutual Fund
IDFC Mutual Fund
IIFL Mutual Fund
Indiabulls Mutual Fund
Invesco Mutual Fund
Kotak Mutual Fund
L & T Mutual Fund
Mahindra Mutual Fund
Motilal Oswal Mutual Fund
PPFAS Mutual Fund
Principal Mutual Fund
Quantum Mutual Fund
Reliance Mutual Fund
SBI Mutual Fund
Sundaram Mutual Fund
Tata Mutual Fund
UTI Mutual Fund
Pros
Buy Direct Mutual Funds
Sell Direct Mutual Funds
Portfolio Dashboard graphical view
Cons
All MFs (list of CAMS + Karvy) are NOT available at Zerodha e.g. Mirae fund is not available
Consolidated statement across fund houses (CAMS and KARVY) could NOT be generated.
MFs are converted into DEMAT at zerodha which I think is not required.
DEMATization brings unnecessary locking of MF with zerodha and additional demat charges are shared below
Non-Zero recurring platform charge (worst is added demat charges)
Rs 50 per month MF management fees + Rs 300 Demat yearly charges and Rs 5 DEMAT sell charge per fund per transaction
STP and SPW not available in zerodha
Mutual Fund purchased from AMC website is NOT also visible at Zerodha
Mutual Fund bought at MyCAMS could NOT be sold from Mutual Fund AMC website
For buy, Fund has to be transferred to zerodha account. Zerodha hold intermediate fund with its platform.
For sell, Fund is transferred to zerodha account. Zerodha hold intermediate fund with its platform. The fund transfer to seller bank account takes 24 hours.
Third-Party Platform like Wealth Trust could NOT be used to transact and visualize Mutual Funds bought from Zerodha
I personally didn't like the Zerodha's tight integration around Mutual Fund with its own platform and funds staying intermediary to zerodha account.
Cons
Does not support Direct Mutual Funds as of Jan 2018
Only Support Regular Mutual Funds which typically has charge of 1%
No Option to set investment goals (Own a House, Retire Easy)
Account for Mutual Fund Transaction
Created MyCams and Karvy account with online validation and NO physical paper work. Refer steps above.
Created Kuvera account online and finding it good for purchase, tracking, goal setting, managing MF.
Update:
I finally switched to Kuvera for all purchase and management, however kept Cams and Karvy account.
The purchase on Kuvera gets visible on CAMS there by validating the purchase allocation is valid.
Frequency of SIP
What should be the frequency of SIP? This is important to evaluate in context of your investment.
I would say keep a threshold at Rs 5000
If SIP is less than say Rs 5000 for single MF it is good to go monthly SIP
If SIP is Rs 10000 for single MF it is good to go 2 times a month Rs 5000 each.
If SIP is Rs 20000 or more for single MF it is good to go weekly SIP Rs 5000 each.
However, important point is in long term (> 5-10 years), the total count of MF units allocation is more or less than with monthly or weekly SIP.
Tracking of Mutual Funds
Create Consolidated Account Statement Karvy + CAMS + FTAMIL + SBFS
This consolidated statement could be uploaded to any platform like Value Research or Wealth Trust or Kuvera to visualize and transact the Mutual Fund Portfolio.
Open Problem
I have come across the open problem after exploring 15 odd platforms to visualize My Mutual Fund Portfolio, that none provides the good graphical view of different aspects of portfolio.
This might be required to be solved individually for a time being.