Can I buy mutual funds without paying load on systematic investment plans? Is there a financial company that offers funds from various fund houses who do not charge loads on SIPs? I use ICICI Direct but it charges load and I want to keep my expenses down.
-Param Ghanshyam
First of all, we would like to congratulate you for your investment strategy. Systematic investment planning (SIP) is the best way to invest as it does away with the need or effort to time the market. By the process of regular investing, one gets to invest in the highs as well as the lows, and this helps in averaging out the volatility of the market.
In order to encourage investors to opt for SIP, a lot of fund companies have removed load on SIPs. For fund houses, it is advantageous as their assets grow every month or quarter, without additional sales effort. Most funds have no entry load for SIPs in both monthly and quarterly options, barring a few like Reliance Mutual funds. But you will have to shell out an exit load, if you wish to redeem your investments before a stipulated period (between six months and two years) depending on the scheme.
Once you have made up your mind on the schemes you would like to invest in, you can call the fund houses and they would take care of all the procedures. You can also transact online on some of the AMCs' websites, eliminating the middleman (mutual fund distributor). But if you have funds of more than one AMC, then it might be a good idea to go through a distributor as you get a one-point contact. Also, distributors follow the same rules as the fund houses, so you are not charged extra. You could go to distributors like Bajaj Capital, Karvy Consultants, Way2Wealth etc.
ICICI Direct gives you the flexibility to choose any amount, modify or cancel the SIP at any point. However, the basic advantage of an SIP is lost because it charges you entry load treating your online SIP request as a fresh order. Hence, the applicable entry load is levied. If you are sure that you will be investing a certain amount every month or quarter, it is better to go to a distributor who does not charge load.
This article was originally published on April 07, 2005.
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