online vs offline sip in mutual funds

POSTED BY prateek gujar ON May 10, 2012 3:56 pm COMMENTS (20)

Hi
Want to start SIP in HDFC Top 200.Want to know if there is difference in commission between online and offline mode( i have demat account in ICICI Direct).How much will it make difference in long run( say 5yrs)
Thanking you
Dr Prateek

20 replies on this article “online vs offline sip in mutual funds”

  1. Jig says:

    Thank you Ashal for clarification.
    I think we found one more good source to invest in MF in addition to security directly.

    Regards
    Jig

  2. Jig says:

    So Ashal,
    It is advisable or not to invest through kotak? or how it is differ than through Fundsindia or Direct AMC?
    I didnt understand with mode of holding . As i can see my investment under my M portfolio and i can put purchase/sale/SIP/STP order direct from my security account.
    Thanks
    Keep sharing
    Jig

    1. Dear Jig, your Kotak account is now at par for MF investment. Please do not get confused. In your trading portal of Kotak securities, you are able to see the units allotted to you from the MF you have invested in. Similar thing is there in fundsindia or fundsupermart or moneysights.

      These units are not credited to your demat account. So these are physical units just like you are investing through a physical form filling process. The difference lies in the fact that form filling is done electronically & you are able to see your units in that trading portal.

      Hope I’m able to clear your doubts.

      Thanks

      Ashal

  3. Jig says:

    I got such statement from kotak securities. You can tell now where are the charges? Is there anything still hidden in this?

    Name:BIRLA SUN LIFE MUTUAL FUND (RTA-Cams) Birla Sun Life 95 Fund – Growth
    Date:07/03/2012
    Tx Type:Purchase
    Amount:2000.00
    Units:6.6540
    Price:300.5600

  4. On a SIP of Rs. 1000 it is 1.5%. On a SIP of 5000 it is 0.3%. However small the costs may be why spend money somewhere when you can do it for free. [And 0.3% is not very small either. It is like a mini trail commission in the way it impacts the final corpus. Check http://wp.me/p1Y418-4o%5D

    Stay away from Kotak Demat for MF investments.

    1. Jig says:

      hello,
      Check no 14 in FAQ section of Kotak securities.
      http://www.kotaksecurities.com/faqs/mf-general.html

      Now can anybody interpret what does they wants to say by that line?

      Also their DP charges schedule is as under:
      http://www.kotaksecurities.com/faqs/demat_charges.html

      Now can you please eloborate how MF investment through demat is affected ?

      I am little bit confused between share investment/ Mf investment through securities.

      Thanks

      Regards
      Jig

      1. You have stated in one place there are fees involved. In this link Kotak say there is no charges whatsoever. I am not sure which statement to go with. I woud suggest investing Rs. 1000 as a minimum investment and check if you are very curious. If they charge you can stop further investments.

        The net take away is if there are charges stay away for they will impact the final return. If ZERO charges are levied then Kotak becomes one stop shop for MF/Stocks.

        DP charges are always levied on a demat account. If you also buy MF thru them you dont have any extra charges really.

      2. Dear Jig, please read the Q & Ans no. 10 in the link –

        http://www.kotaksecurities.com/faqs/mf-general.html

        It’s clearly written there that Kotak is offering only physical mode of holding, hence the charges are not applicable in terms of entry load or transaction charge unlike ICICI Direct.

        The same thing is clear from the unit allotted to you in that Birla fund.

        Thanks

        Ashal

  5. Nitin Verma says:

    Kotak charges 15 rupees per successful order in SIP

  6. Read all the fine print. Almost all brokers charge a transaction charge for investments > 10,000. IF a Sip for 1000 is set up for 12 months the value of the SIP is calculated as 1000*12=12000 and a transaction charge will be levied.

    Only sites like Moneysights.com, Fundsindia.com etc. will ensure there are no transaction charges, at least for now (And ofcourse investing directly with the AMC as well = zero charges).

    Having said that if it is true that the Kotak Demat ‘really’ does not charge you it is ideal to go with them as it can provide you consolidated view of your Stocks and MF in a single place!

  7. Jig says:

    Hello,
    How it is diffferent if i am investing in MF through Kotak Demat Account. They said there are zero chargfes for MF investment and also it is online.

    1. Dear Jig, please confirm with Kotak, here zero charges means no brokerage or no charge at all? Please consider the point raised by dear Nitin.

      Thanks

      Ashal

  8. There is no difference for you .. In ICICI DIrect case , ICICI will earn commissions , in other way , someone else will do 🙂 .. BUt for you it will not make any differece

    In case of ICICI Direct , they also charge per SIP , so thats their own charges ! .

    Go for fundsindia.com or moneysights.com

    1. Since ICICI Direct charges per SIP it makes a humongous dent in the final corpus above (not even counting the trail to which everyone is anyways subject to)

  9. prateek gujar says:

    Thanks a lot for your valuable advise.I will definitely avoid sip through icici direct.
    Dr Prateek

    1. Dear Prateek, there is no difference for the trail commission paid to the broker/distributor by the AMC be it online or offline. The difference ‘ll come from the upfront charges levied by some distributors like ICICI-Direct on every SIP or single investment.

      A practical solution with I-Direct is possible if you do have around 8.25L Rs. or more. Invest the same in a liquid fund using I-Direct fund & then enroll for regular SIPs. Now after each month – you may redeem from that liquid fund an amount equal to the SIP invested from the bank account. This way, your investment ‘ll always remain above that cut off point of 8L Rs. to be eligible for zero up front charge.

      If you do not want to use I-Direct, you may use http://www.fundsindia.com .

      Disclosure – I’m using http://www.fundsindia.com for my own investments.

      Thanks

      Ashal

      1. Ramprakash says:

        Hi Ashal,

        I had read somewhere on icicidirect that they do not count liquid funds amount when calculating the 8 lac figure.

        1. Dear Ram Prakash, please quote the exact info, I ‘ll be happy to correct myself. Even if I assume you are right, instead of liquid funds, the money can be invested in short term debt funds.

          Thanks

          Ashal

  10. Do not do it with ICICI Direct unless you already have a balance of over 8 lacs worht MF with ICICI Direct at which point it is zero charge.

    I think the charges are 1.5% or Rs. 30 whichever is lower. In the simplest case where you have 1 SIP for Rs. 3000 each month you will incur a charge of Rs. 30 or 1%. If you continue this for 25 years the final corpus

    – 47.71 lacs via ICICI Direct (11% CAGR as 1% is lost at the outset – just a crude calculation, it will be even lower)
    – 56.92 lacs with no such fees (12% CAGR)

    That is a mammoth 19% difference in 25 years. On a 15k monthly SIP the difference in 25 years is about 46 Lacs.

    If you have multiple smaller SIPs the returns will be even lower in ICICI Direct. No second thoughts – JUST STAY AWAY unless your corpus is 8 lacs+

  11. BanyanFA says:

    Hi Prateek,
    It won’t matter from commission perspective if you do online or offline. However, it may be cheaper to do offline as ICICI Direct may have potential charges for SIP. However, you may be able to find a distributor would be happy to do it free for you.

    What ever is paid as a commission to the distributor is coming out of AMC’s pocket (though in the end coming out of investor’s funds), but your individual decision to go online / offline won’t affect the expense ratios materially.

    The only advantage of going via online brokers is that you don’t have to do the paper work and your portfolio status is visible online on ICICI’s webportal. However, to tackle it, many distributors are offering online facility to the investors whereby the investor can view the portfolio online at the respective distributor’s website..

    Regards
    BanyanFA

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