Expert
31-03-2009, 08:26 AM
The Securities & Exchange Board of India (SEBI) now offers investors an opportunity to invest in mutual funds without paying entry load of upto 2.25%. To avoid paying the entry load you now have to invest directly with the Mutual Fund i.e. you have to submit the form directly to the Mutual Fund without the assistance of any agent/distributor.
What is an Asset Management Company (AMC)?
The company that manages a mutual fund is called an AMC. For all practical purposes, it is an organized form of a "money portfolio manager". An AMC may have several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
How does "entry load" eat into your investment returns?
A 2.25% entry load sounds small. But it still bites a chunk off your returns over a long period of time. For instance, Rs 1 lakh invested directly in the no-load option of an equity fund that grows at a rate of 15% over a period of 20 years yields around Rs 16.36 lakh against Rs 15.99 lakh that a load fund would return—a difference of Rs 36,820. This is because even a small sum of 2.25% gets compounded over the years.
The pinch remains the same even in a systematic investment plan (SIP). As SIPs entail investments on a regular basis, say every month, you end up paying entry loads on all your investment instalments. Assume you had invested Rs 5,000 in Reliance Vision Fund (RVF) on January 1, 2003 through a monthly SIP. If you had withdrawn your entire investment after five years, on December 31, 2007, you would have got back Rs 11.52 lakh in the no-load option and Rs 11.25 lakh in a load option, a difference of a cool Rs 25,914.
Some AMCs offer online investing on their websites. Get connected to these websites and start investing -
ICICI Pru - https://www.icicipruamc.com/InvOnline/invest.asp
Fidelity - https://www.fidelity.co.in/transact/index.html
SBI - http://www.sbimf.com/index.asp
Kotak Mutual - http://www.kotakmutual.com/kmw/online/online_transaction.htm
HDFC Mutual - http://www.hdfcfund.com/InvestorCorner/ContentDisplay.aspx?
Birla SunLife - https://www.birlasunlife.com/BirlaSunLife/Mutual_Fund/BSLAMC_Mybsfs/AMCindex.aspx
What is an Asset Management Company (AMC)?
The company that manages a mutual fund is called an AMC. For all practical purposes, it is an organized form of a "money portfolio manager". An AMC may have several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
How does "entry load" eat into your investment returns?
A 2.25% entry load sounds small. But it still bites a chunk off your returns over a long period of time. For instance, Rs 1 lakh invested directly in the no-load option of an equity fund that grows at a rate of 15% over a period of 20 years yields around Rs 16.36 lakh against Rs 15.99 lakh that a load fund would return—a difference of Rs 36,820. This is because even a small sum of 2.25% gets compounded over the years.
The pinch remains the same even in a systematic investment plan (SIP). As SIPs entail investments on a regular basis, say every month, you end up paying entry loads on all your investment instalments. Assume you had invested Rs 5,000 in Reliance Vision Fund (RVF) on January 1, 2003 through a monthly SIP. If you had withdrawn your entire investment after five years, on December 31, 2007, you would have got back Rs 11.52 lakh in the no-load option and Rs 11.25 lakh in a load option, a difference of a cool Rs 25,914.
Some AMCs offer online investing on their websites. Get connected to these websites and start investing -
ICICI Pru - https://www.icicipruamc.com/InvOnline/invest.asp
Fidelity - https://www.fidelity.co.in/transact/index.html
SBI - http://www.sbimf.com/index.asp
Kotak Mutual - http://www.kotakmutual.com/kmw/online/online_transaction.htm
HDFC Mutual - http://www.hdfcfund.com/InvestorCorner/ContentDisplay.aspx?
Birla SunLife - https://www.birlasunlife.com/BirlaSunLife/Mutual_Fund/BSLAMC_Mybsfs/AMCindex.aspx