Cancellation of Entry fee for mutual funds and how to apply for stopping the payment of entry fee | How to invest through online in MFs

August 15th, 2010| Finance, How To.

Cancellation of Entry fee for mutual funds and how to apply for stopping the payment of entry fee | How to invest through online in MFs

Exactly one year before SEBI has cancelled the entry fee for mutual funds. Mutual Fund Investors had to bear the fees of 2.25% till last year.  Many people were happy when it was cancelled, but investors are falling behind in cashing it.

Investments are more as there is no entry fee.  But as the commission is not sufficient many agents and distributors has stopped the transactions of mutual funds.  Even old customers are being neglected. Many people who are investing from 1st August, 2009 in Systematic Investment Plan are still paying the 2.25% entry fees.

If you are still paying the entry fee, first give an application to the bank asking to stop the electronic clearance system before investing in mutual funds.  For example, the account is debited on 10th of every month. Give the stop ECE form to the bank on 5th August.  The bank takes 30 days time to implement it.  The amount to be transferred to the fund company on 10th September will be stopped.  A new ‘SIP’ can be started with the same portfolio number after confirming that the amount has not been debited.  This way an amount of 2.25% can be saved.  Do not forget that small amounts give huge incomes in long run.  For example one has invested an amount of Rs.10,000 for ten years in SIP.  25% income at the end of term amounts to Rs.51.01 lakhs.  If any entry fees is not paid, the total amount  the investor will receive is going to be  Rs.52.2 lakhs.      That means the entry fee of Rs.225 paid every year has become Rs.1.17 lakhs in ten years.

Through online

All most all Mutual fund companies are offering the facility of investing through online.  Log onto the related web site and choose the investment option.  If one has the internet facility, units can be bought, sold or reviewed.  The investor can do the transaction during the market hours at his convenient time. For example if the units of a plan or bought through internet at 03.00 pm the units will be allotted to the investor as per the Net Asset Value of that day.  The amount will be credited to the investors account immediately.  If the units are bought from an agent and amount is paid through a cheque,  the units will be allotted to the investor as per the NAV of next day.  These types of problems will not arise in the online method.

The persons who are investing through online for the first time have to fill the Personal Identification Number form and register themselves.  This form can be downloaded from various Fund company’s web sites.  Filled in applications has to be submitted to the nearby fund office.  It can be submitted at the head quarters also.  Address proof and attested Xerox copy of the passport are also be submitted.  Pin number of Folio number will be allotted to the applicant within a week.  With these two numbers the investor can directly invest in any of the plans.

If the investment amount is more than Rs.50,000 a  KYC (Know your customer) form is to be filled, which are available in the fund offices.  While submitting, a passport size photo, Xerox copy of PAN card, Address proof, professional and income details are to be furnished.

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