Mutual funds are one of the most popular investment options in India, as they offer diversification, professional management, liquidity, and tax benefits. However, buying mutual funds can be confusing for beginners, as there are thousands of schemes to choose from, and different ways to invest in them. In this blog post, we will explain how to buy mutual funds with the help of an advisor or a broker in India, and what are the advantages and disadvantages of each method.
What is an advisor or a broker?
An advisor or a broker is an intermediary who helps you buy mutual funds from various fund houses or asset management companies (AMCs). They can also provide you with financial planning, portfolio management services, research, and advice services. There are two types of advisors or brokers in India: regular and direct.
Regular advisors or brokers sell you regular mutual funds, which charge a commission or a fee from the AMCs. This commission is deducted from your returns as an expense ratio, which is the annual cost of running a mutual fund scheme. The expense ratio of regular mutual funds can range from 0.5% to 2.5% per year, depending on the type and category of the scheme.
Direct advisors or brokers sell you direct mutual funds, which do not charge any commission or fee from the AMCs. This means that you get the full benefit of your returns, as the expense ratio of direct mutual funds is lower than regular mutual funds by 0.5% to 1.5% per year. Direct mutual funds also have higher net asset value (NAV) than regular mutual funds, as they reflect the true value of the scheme without any deductions.
How to buy mutual funds with the help of an advisor or a broker?
You can buy mutual funds with the help of an advisor or a broker either online or offline. Here are some steps and instructions for both methods:
Online method:
- Choose an online platform that offers direct or regular mutual funds from various AMCs. Some examples are The Gainers, Zerodha Coin, Upstox MF, Groww, ETMoney, INDMoney, etc.
- Register on the platform with your personal details, PAN card, Aadhaar card, bank account details and KYC documents.
- Explore and compare different mutual fund schemes based on your investment goals, risk appetite, time horizon and preferences.
- Select the schemes that suit your needs and add them to your cart.
- Enter the amount and frequency of your investment (lump sum or systematic investment plan).
- Review your order and confirm it with your UPI PIN or net banking credentials.
- Track and manage your portfolio online through the platform’s dashboard or app.
Offline method:
- Visit the nearest branch or office of an advisor or a broker that offers direct or regular mutual funds from various AMCs.
- Fill up an application form with your personal details, PAN card, Aadhaar card, bank account details and KYC documents.
- Choose the schemes that suit your needs from the list provided by the advisor or broker.
- Enter the amount and frequency of your investment (lump sum or systematic investment plan).
- Pay by cheque or demand draft in favour of the AMC or scheme name.
- Receive a confirmation email or SMS from the AMC or platform with your folio number and transaction details.
- Track and manage your portfolio offline through periodic statements or online through the AMC’s website or app.
What are the pros and cons of buying mutual funds with the help of an advisor or a broker?
If you are interested in investing in mutual funds, you may wonder whether you should do it on your own or with the help of an advisor or a broker. Both options have their pros and cons, and the best choice depends on your personal preferences, goals, and level of financial knowledge. Here are some factors to consider before making a decision.
Pros of buying mutual funds with an advisor or a broker:
- You can benefit from their expertise and experience in selecting and managing mutual funds that suit your risk profile, time horizon, and objectives.
- You can get personalized advice and guidance on how to diversify your portfolio, rebalance it periodically, and adjust it to changing market conditions and life events.
- You can save time and effort by delegating the research, analysis, and paperwork involved in buying and selling mutual funds to them.
- You can access a wider range of mutual funds that may not be available to individual investors, such as institutional or exclusive funds.
- You can enjoy lower fees and commissions if you buy mutual funds through a discount broker or a robo-advisor that offers low-cost or no-load funds.
Cons of buying mutual funds with an advisor or a broker:
- You have to pay fees and commissions to them for their services, which can reduce your returns over time. These fees may include sales charges (also known as loads), management fees, advisory fees, transaction fees, account maintenance fees, and others.
- You may face conflicts of interest or biased recommendations if they receive commissions or incentives from the fund companies for selling certain mutual funds to you.
- You may lose some control and flexibility over your investment decisions if you rely too much on their advice or follow their suggestions blindly.
- You may not get the best performance or value from your mutual funds if they are not aligned with your goals, risk tolerance, or investment style.
- You may have limited options or choices if you buy mutual funds through a full-service broker or a traditional advisor that only offers funds from certain fund families or platforms.
As you can see, buying mutual funds with an advisor or a broker has its advantages and disadvantages. Ultimately, the decision depends on your personal situation, preferences, and goals. You should weigh the costs and benefits of each option carefully and do your own research before investing in any mutual fund. Remember that no one can guarantee the future performance of any investment, so you should always be prepared for the risks and uncertainties involved in the market.
