SEBI (Securities Exchange Board of India) has launched the much awaited MF Utility (MFU) on 21st Jan, 2015. Mutual Fund Utility is an AMFI (Association of Mutual Funds of India) initiated online mutual fund investment platform.
Before knowing more about MF Utility Online facility, let us understand different ways of investing in Mutual Funds and ‘Direct’ Vs ‘Regular’ plans of mutual fund schemes.
What are the different ways of investing in Mutual Funds?
How to invest in mutual funds? If you are new to mutual fund investments and want to start investing, you need to know the various ways of investing in MFs.
Currently there are many ways through which you can invest in Mutual Funds (MFs), these are;
- Individual agents or Investment Advisors
- CAMS / Karvy
- Demat Accounts (Ex – ICICI Direct)
- Online Distributor Platforms (Ex – Fundsindia.com)
- Mutual Fund house Websites
Regular Vs Direct Mutual Fund Plans
If you have been investing in mutual funds, you might have observed that there are two types of plans of the same MF scheme are available now. One is a ‘Regular Plan’ and second one is ‘Direct’ Plan.
Around two years back SEBI introduced ‘Direct’ Plans. Now, AMCs (Asset Management Companies) provide you with these two options for each and every mutual fund scheme. (Some AMCs offer Direct plans only )
The main difference between Regular plans and direct plans is the Expense Ratio. What is Expense ratio? Expense ratio shows the amount that mutual funds charge for managing the investors’ money. A Regular Mutual fund scheme has higher expense ratio when compared to a Direct MF plan. The main reason for this is, there is no intermediary involved between you and AMC (Asset Management Company).
For example – The expense ratio of HDFC Top 200 Fund Direct Plan is 1.65% and the expense ratio of HDFC Top 200 Regular plan is 2.23%.
You can observe that the NAVs (Net Asset Values) of Mutual Fund Direct Plans are slightly higher than the NAVs of Regular plans. So, over a long investment period you can certainly benefit from investing in Direct MF schemes.
For example – The NAV of HDFC Top 200 Fund Direct Plan (Growth) is Rs 359.72(as on 20-Feb-2015) and the NAV of HDFC Top 200 Regular plan is Rs 355.32 .
The difference between accumulated corpus of a Direct Plan and a Regular Standard Plan will be significant if your time horizon is say more than 15 years. (Kindly note that investment portfolios of both regular and direct plans of a scheme are same)
How to invest in Mutual Fund Direct Plans?
If you are manually filling MF investment form (application form), you have to select the option called ‘DIRECT.’ You can also invest in Direct plans online (some MF houses provide this facility) by visiting the respective AMC websites.
The main drawback of this is, if you have to invest in 5 different mutual fund schemes offered by multiple mutual fund houses, you have to either visit respective AMC offices (offline) or visit their websites. If there is a change in your KYC details (like change of address or bank account number etc.,) then you need to inform all the AMCs. So, investing in Direct Plans is somewhat a tedious job as of today.
This is set to change…
What is MF Utility (MFU)?
MF Utility is a shared infrastructure of all AMCs in India to provide online investment facility to mutual fund investors. MFU is sponsored and funded by the mutual fund houses.
The Association of Mutual Funds of India’s (AMFI) MF Utility is a single-window online platform for investment in MF schemes across fund houses. It will work as a web-based transaction aggregator.
MF Utility (MFU) is a browser-based application that connects investors to registrars and transfer agent (RTA), bank, fund house, payment gateway KYC registration agencies (KRAs).
Investors can invest in Direct Plans and Regular Plans through MF utility. This platform will definitely help investors of Direct MF Schemes. The MF Utility portal currently has 25 AMCs which have signed up with MF Utility. Distributors and Investors can register with Mutual Fund Utility.
How to Register with Mutual Fund Utility?
To access MF Utility, you need to get CAN (Common Account Number) activated. The subscription to MF Utility is free of cost. Download the CAN registration form and submit the completed form at MF Utility POS (List of MFU Points of Service). This is a one-time procedure.
If you are not KYC compliant then MF Utilties India will facilitate the KYC registration for investors along with the creation of CAN. (Download KYC registration forms)
As of now, the online transaction facility is not yet activated. The investors may have to wait for few more months to start investing in Direct Plans online. But, the registrations are open and you can go ahead and register yourself as an ‘investor’ with MFU.
Important points, FAQs & Benefits of MF Utility online facility :
- Can I Invest in all Mutual Fund Direct Plans? – As of now, 25 AMCs are participating in MF Utilitiy platform. You can invest in all the schemes offered by these mutual fund houses. You can choose to invest either in regular or direct plans.
- You can submit Common Transaction Form to transact in multiple schemes at a time, across Mutual Funds.
- Can I transfer my existing Mutual Funds to MFU? – Once your CAN is activated, all your existing Mutual fund schemes (Direct / Regular plans) of the participating AMCs will be mapped to your CAN account. You can view the details of your MF investments at one place. You can switch from Regular plan of XYZ Mutual Fund Company to Direct plan of same XYZ mutual Fund company. But switches between two different mutual fund houses are not allowed. (Kindly note that MF switch may attract exit load and Capital gains taxes. You can switch equity funds’ units which are more than one year old, to avoid Capital gains tax)
- Can I view consolidated statement of all my investments? – Consolidated view of investments across the industry using your CAN is possible.
- Will I get alerts or reminders? – Alerts, triggers and reminders for transactions, SIP expiry etc. will be provided.
- Centralized complaint management and tracking system to login complaints across the industry is provided.
- Investor can submit changes to Bank Mandate and other details in CAN to MFU POS, and such requests will be appropriately processed in MFU and will be updated in all related folios. Thus change of CAN level details, such as Bank Mandate, Nominees, etc., submitted through MFU will reflect in all mapped folios with different AMCs and there is no need for submission of such requests separately with different AMCs.
- CAN will facilitate registration of one debit Bank Mandate for multiple SIP registrations using a Common Transaction Form (CTF) in schemes across Mutual Funds participating in MFU.
- MFU enrollment is free for both distributors and investors. No charges are applicable.
- How to transact through MF Utility? – Online transactions facility is not yet enabled. So, as of now you can submit a physical transaction form (from 4th March, 2015) at a MF POS (or) through a distributor who is registered with MF Utilities India Pvt Ltd (MFUI). Once the online facility is made available then you can execute all your MF transactions paperless (online).
- 24/7 online access across mutual funds to access NAV and MF Scheme related information.
So, MF Utility is a centralized mutual fund distribution platform, which will facilitate transactions by customers, distributors and financial advisers in schemes offered by various fund houses on a unified platform. This initiative will help development of the MF industry in smaller towns, besides providing convenience and efficiency to all stakeholders.
( Image courtesy of Stuart Miles at FreeDigitalPhotos.net ) (You may like reading my article on “Top 15 Best Equity Mutual Funds.”)