My uncle has recently retired and received a huge sum as a retirement benefit. He wants to invest Rs 10 lakh in mutual funds using a mobile application. Is it a safe way to invest such a huge amount?
- Sanjeev
Yes. Many of these apps are only an enabling mechanism. I think your uncle needs to focus more on where he should invest. Although your uncle would be investing in mutual funds using a mobile app, the money will never go to the app or the company running it. It will go directly to the fund house. This is how mutual funds are structured.
The app can be mounted in three ways: through BSE membership, NSE membership or the mutual fund utility. The app routes the amount invested. But still, the money never goes to the app, rather it goes directly to the fund house.
So, when your uncle's account gets debited, it will be credited to the fund company's account directly. Likewise, all the redemptions will come directly to the bank account of your uncle. This is the law, which is mandated by the mutual fund regulations for every fund company to follow.
Hence, the possibility of the money invested through an app slipping out or the risk in the design of an app is ruled out. But your uncle should just check the authenticity of an app. Nevertheless, all the mobile applications mounted on this framework are reasonably safe.
Further, if the app company goes bankrupt tomorrow or disappears, your uncle's money will remain safe, as the fund company only takes care of every account. In that case, your uncle can directly deal with the fund company without any hassle.
This article was originally published on April 08, 2019.
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