Mutual Fund In Demat Issues And Doubts

#1
I am currently investing in MF by sharekhan demat account and it is doing well so far. I have following queries related to above method of investment.

1) What happens if tomorrow broker goes bankrupt or for any reason they deny redemption of my mutual fund units?

2) Should i also invest directly in fund house instead of going through demat?

3) I am thinking of half investment by demat & rest by MF house. Do people use both methods of MF investment or anyone?

Looking forward your reply.
Thank you.
 
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TracerBullet

Well-Known Member
#2
I am currently investing in MF by sharekhan demat account and it is doing well so far. I have following queries related to above method of investment.

1) What happens if tomorrow broker goes bankrupt or for any reason they deny redemption of my mutual fund units?

2) Should i also invest directly in fund house instead of going through demat?

3) I am thinking of half investment by demat & rest by MF house. Do people use both methods of MF investment or anyone?

Looking forward your reply.
Thank you.
Invest Directly. Why do you want to pay your broker so much every year.
 
#3
Why do you want to pay your broker so much every year.
Thanks for the reply. I think still there is some benefit with MF in demat like you don't have to visit individual MF house. But my queries are:

1) Is MF investment directly in fund house more secure than by the broker?

2) If you have already demat account and want to invest 3lakhs via demat and rest 3lakhs directly in fund house. How is this approach?
 

TracerBullet

Well-Known Member
#4
Thanks for the reply. I think still there is some benefit with MF in demat like you don't have to visit individual MF house. But my queries are:
1) You only have to do it once. Assuming this is long term investment are you ready to pay so much EVERY year to your beloved broker? These missed investments will compound and over 20 year period you will have approx 20-40% less returns aggregate. That is a lot of money.

2) Since you already have demat, you can use folios already created and register them online. Then you will not have to visit MF house and will be able to invest directly if your email and mobile is correctly registered with the folio.
You can also just invest in a liquid fund to create folio if you dont own any fund from a fund house

Make a list of 4-5 Good Fund houses and use them only for ease of management. Many Funds can also be managed in a single portal using mycams

3) If you have already invested through broker and want to shift to DIRECT version, make sure you wait until exit load time has expired.

1) Is MF investment directly in fund house more secure than by the broker?
Its as safe and probably safer because you dont have extra broker account that can access the funds.

2) If you have already demat account and want to invest 3lakhs via demat and rest 3lakhs directly in fund house. How is this approach?
Read above, i think there is 0 reason not to take small effort to have Direct access, its foolish really if these are long term investments

Edit - Here is easy to undestand article on impact of expense on long term investments. The article is in context of index funds but the impact will be same for Direct vs Regular funds. In India, MF consistently beat indices so index funds wont outperform inspite of lower expenses. Also, note that i have 25% less is same way of saying i could have 33% more.
 
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#6
1) You only have to do it once. Assuming this is long term investment are you ready to pay so much EVERY year to your beloved broker? These missed investments will compound and over 20 year period you will have approx 20-40% less returns aggregate. That is a lot of money.

2) Since you already have demat, you can use folios already created and register them online. Then you will not have to visit MF house and will be able to invest directly if your email and mobile is correctly registered with the folio.
You can also just invest in a liquid fund to create folio if you dont own any fund from a fund house

Make a list of 4-5 Good Fund houses and use them only for ease of management. Many Funds can also be managed in a single portal using mycams

3) If you have already invested through broker and want to shift to DIRECT version, make sure you wait until exit load time has expired.


Its as safe and probably safer because you dont have extra broker account that can access the funds.


Read above, i think there is 0 reason not to take small effort to have Direct access, its foolish really if these are long term investments

Edit - Here is easy to undestand article on impact of expense on long term investments. The article is in context of index funds but the impact will be same for Direct vs Regular funds. In India, MF consistently beat indices so index funds wont outperform inspite of lower expenses. Also, note that i have 25% less is same way of saying i could have 33% more.

Hi TracerBullet,

Accidentally saw this thread, thanks for good info..

I need your good suggestion...what to do next..I was invest 5 mutual funds on April'2012.,

1. BIRLA SUN LIFE DIVIDEND YIELD PLUS - DIVIDEND
2. HDFC LONG TERM ADVANTAGE FUND - DIVIDEND (closed ended)
3. ICICI PRUDENTIAL DYNAMIC PLAN - DIVIDEND
4. ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND - RETAIL - DIVIDEND
5. RELIANCE VISION - DIVIDEND

6. BSL Frontline Equity Fund Growth-Direct

1-5 was invest through Bajaj Capital
6- This fund purchased online via BSL portal through existing folio no.1

I understand my mistakes..
a. I was invest through brokers..
b. I was selected Dividend-Reinvestment



I am ready to do all fund redemption..and go with direct invest in growth option.,

What to do next..Pls guide me.,
 

TracerBullet

Well-Known Member
#7
Hi TracerBullet,

Accidentally saw this thread, thanks for good info..

I need your good suggestion...what to do next..I was invest 5 mutual funds on April'2012.,

1. BIRLA SUN LIFE DIVIDEND YIELD PLUS - DIVIDEND
2. HDFC LONG TERM ADVANTAGE FUND - DIVIDEND (closed ended)
3. ICICI PRUDENTIAL DYNAMIC PLAN - DIVIDEND
4. ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND - RETAIL - DIVIDEND
5. RELIANCE VISION - DIVIDEND

6. BSL Frontline Equity Fund Growth-Direct

1-5 was invest through Bajaj Capital
6- This fund purchased online via BSL portal through existing folio no.1

I understand my mistakes..
a. I was invest through brokers..
b. I was selected Dividend-Reinvestment



I am ready to do all fund redemption..and go with direct invest in growth option.,

What to do next..Pls guide me.,
Relying your pm,

1) Make sure you wait until exit load time has expired before moving investments with brokers and then redeem / switch all to DIRECT GROWTH.
2) Make fresh investments (from salary ) using SIP/STP, If you want you can some extra on 10% pullbacks if you follow markets.
3) You can get List of funds from fundsindia/morningstar.in/value research recommendations. See these threads here, here and here
4) Also, try to understand what different categories of funds do and and get some basic overview of some differences between funds. Just read and compare fund details in fundsindia/morningstar.in/value research. Prefer funds/fund managers with long term track record.
 

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