Monday, September 10, 2007

AMCs come together to oppose entry load waiver

The Economic Times reports that leading AMCs have joined ranks to oppose the SEBI's move to scrap Entry Loads on direct fund investments, i.e., investments that do not go through a broker.

What SEBI is trying to do here is to ensure that when an investor approaches an AMC directly to purchase units or set up an SIP, he or she should not be charged an entry load. Quantum AMC is the only Indian AMC that allows investors to purchase funds directly and does not charge an entry load. Investors can create an account on their web site and transact directly. That amounts to a 2.5% saving every time you purchase mutual fund units, either through a bulk purchase or via the SIP route.

If an investor is capable of making their investment choices then why should they pay an entry load? SEBI's move makes perfect sense. Then why are the AMCs opposing this move? Or is it the brokers who are opposing the move and hence the AMCs are under pressure? I suppose the latter is the case because most AMCs pay out the entire 2.5% charge to the brokers.

The argument is that brokerage houses have spent huge amounts of money to set up investment centers across the country and AMC will have a very difficult time replicating this reach.

What? Does that argument make sense? Not to me!

We are talking about direct investments here. I don't talk to a broker anyway. I do my own research on web sites like Value Research Online and make my own decisions. On my own time. So why am I paying an 2.5% entry load?

Quantum AMC has a solution. You can either do all your transactions online if you have Internet banking facilities from your bank (like ICICI, HDFC, SBI etc). Otherwise you can download their application form, print it, fill it in and post it along with a cheque. Simple. Total cost is about 30 rupees even if you have to use a cyber cafe to access the Internet and print the form. Plus postage.

Do the math people. 2.5% of your money is lost every time you buy an mutual fund. That 2.5% would have earned the same return as the rest of your money.

1 comment:

Anonymous said...

Dear Gautam, On behalf of Quantum AMC, I would like to thank you for writing about us and the immense benefits of removal of entry load for direct investments.

I hope investors would write to the regulator in large numbers and benefit from a hopefully favourable decision.

Meanwhile Quantum AMC, will continue its crusade to educate individual investors and serve them with benefits of low cost through direct investment.

Thank you!
Nagesh Pai
Quantum AMC Pvt. Ltd.