No Load Funds (In real sense)

SEBI has proposed to do away with the “entry load” fee that investors are charged if they buy mutual fund schemes directly from fund houses.

A Sebi concept paper that was put out today for feedback from the public said investors buying mutual fund products need not pay entry load for applications filed online or through collection centres of asset management companies (AMCs).

Mutual fund houses generally charge a fee from investors as an “entry load” to pay distributors’ commission. If implemented, this proposal would be a severe blow to the distribution business, since it would encourage investors to buy directly from AMCs. Distribution channels play a major role in popularising fund schemes and making them accessible for investors.

Some experts feel the entire discussion is flawed in concept. The load charges in India at about 2.25% are the lowest compared with any part of the world. In overseas markets, it is 6-7%.

Others, however, say the move might be designed to promote online transactions.

Many also feel that there is a need for distribution channels and online platforms to co-exist. As Indian Mutual Fund Industry moves towards an environment of paperless transactions, this is a much-needed step.

It is good for those who can take decisions themselves and do not need a financial advisor.

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