I would like to buy mutual funds directly from AMCs, but that requires sending an application to each AMC separately. Can I first invest some token money in each fund through an online portal like Funds India or Fund Supermart and then use the folio number to make all additional transactions directly (buying additional units or SIP) from the AMC site? Any changes I wish to do (like KYC, bank details etc) can be done through Funds India or Fund Supermart and it would be updated in the folio for the token units I had purchased initially and in turn for the direct funds I had purchased as well. This way I would get the advantage of direct funds and the convenience of managing less paper work. Is my understanding correct or am I missing something?
-Dinesh Verma
What you are proposing is not feasible, and even if it were, it would not be ethical. Distributors like Funds India are not charitable organisations. They have to pay their costs through the commissions that they earn. They are willing to spend time, money and effort on starting your account, doing your KYC and providing you with online facilities and content so that you invest through them.
What you are saying is that you will trick them into doing your work and then invest directly. This is wrong, and in any case, not even feasible. The same fund cannot be invested into directly as well as through a distributor. The direct and non-direct schemes of each fund are different. If you start investing in a specific fund through a distributor, then that will be a non-direct scheme. Moreover, direct and non-direct folios are different. If you start a folio with a broker and later switch it to direct, the broker will not be able to access its data and service it in any way. If you want the advantage of investing directly, you should be willing to do a bit of work to register directly with the AMCs. It's not that difficult.
This article was originally published on March 19, 2014.
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