There are Two types of Mutual Funds – One is Direct Mutual Funds and the Other is Regular Mutual Funds (Indirect).
Regular Mutual Funds:
These are normal mutual funds you buy through any broker. This is the regular mutual funds in which you invest. In such mutual funds, the intermediary or the broker gets his commission from the mutual fund company and your earnings reduce by around 1.5%, which is a big amount in terms of returns. Your returns are reduced by around 1.5%.
Direct Mutual Funds:
These Mutual Funds are more Profitable as all the returns comes to your hands. There is no intermediary normally in such case. In such case you buy directly from the company and it pays you all the earnings without deducting any commission part. These are the most beneficial one. But the only problem in such case is to keep record of all the mutual funds separately which is cumbersome and inconvenient. To solve this Zerodha has launched a new Coin plateform, where you can buy direct Mutual funds keeping all the records at one place, with easy management.
Zerodha Coin Comparison with Other Brokers:
Almost 90% of mutual fund investments today happens through regular plans. In regular mutual funds the distributor gets paid back upto 1.5% upfront and 1% end of every year as trail commission.
To give you an example, if you invest using regular plan (assuming return of 15%), SIP of Rs 5000 for 25 years, corpus at end is 1.36 crores. If you do the same through direct mutual funds, it can be Rs 1.64 crores. Whopping Rs 28 lks more. That is because in regular plan every year 1% goes away as commission, in direct it doesn’t.
Why direct mutual funds on Coin?
Currently, the way to buy direct mutual funds is to visit the AMC/fund house website or office and directly invest. Different portfolios for different AMC’s, getting a common account number (CAN), cumbersome setting up SIP process, generally quite inconvenient. Hence coin.
- Coin offers investing in direct mutual funds (they earn 0 commission from your investment) with the convenience of being in demat. So single portfolio across stocks, MF ( over 31 AMC’s and 2000 funds), ETF’s, Bonds etc.
- Easy SIP, start stop whenever you want without any NACH requirement. Increase or decrease SIP values at will.
- NAV tracking orders. Similar to stocks, place orders to purchase or redeem funds based on NAV.
- MF in demat form and hence fungible. Extremely easy to pledge and take a loan against in case of emergency.
- Single capital gain statement, P&L, visualizations, and more.
- MF or stocks in demat are much easier to claim by dependents (nominee of demat) in the case of death. Direct plans with multiple AMC’s would mean multiple folios, difficult to aggregate and claim.
Don’t have a Zerodha account?
Benefits: Direct Mutual Funds/ Excellent platforms / Free equity investments / Flat ₹20 intraday and F&O trades