5paisa a leading discount broker, introduces Direct Mutual Fund Investment. 5paisa is the second discount broker to start offering direct mutual fund from their platform.
5paisa is a discount broker offering flat fee trade in Rs 10 per executed order in Equity Delivery, Equity Intraday, Derivatives, and Currency. The company offers its service via online FREE trading platform. Company also provides mutual fund investment, DP service and Insurance advisory.
Mutual funds are offered in 2 formats – Regular Plan and Direct Plan. In Regular plan, AMC include commission which they pay to Mutual Fund Distributor. So assume if AMC expense for any mutual fund is 1% and they give .5% commission to distributor, then total expense on mutual fund will be 1.5%. The .5% will go to your distributor who helped you to invest in Mutual fund.
Now for Direct Mutual fund, AMC shows the actual expense which is 1% in above example, as direct mutual funds does not pay any distribution payment, so investor who choose Direct mutual funds can save intermediate commission of .5% as per above example.
This intermediate commission varies from .25% to 2%, depending on the funds.
Now with the above example it’s clear that when we choose regular mutual funds we need to pay extra commission, which we can avoid by investing in direct mutual funds. The amount of middle man/ broker’s commission which looks very small in terms of percent, but can make huge difference in your long term investment.
A SIP of 10,000 per month for 20 years can potentially save up to 25 lakh as commission. (With the assumption of 0.5% difference between expense ratio between regular plan and direct plan)
For more details about regular plan vs direct plan please refer our article Mutual Funds Regular vs Direct Plan
In initial phase 5paisa started its mutual fund investment option for Regular plans only. Now the broker has started offering Direct Mutual Fund plans also. As company is not getting any commission for direct plan, they are charging Rs 10 per transaction. Even though paying Rs 10 and investing in direct plan will not hurt you as you will save on your expense ratio for full life cycle of your investment.
You can invest in direct mutual fund via 5paisa mobile app or trading platform. To do you just login to your 5paisa mobile app.
On menu option, click on Mutual Funds> overview> direct mutual funds.
Select the fund which you wish to buy, click on buy button.
Fill the amount you wish to invest.
Validate your order amount and fee and complete payment.
Investing in Regular Plan with 5paisa is completely free. To invest in Direct plan, 5paisa charges Rs 10+GST per transaction on buy and sell orders.
Last updated on 30th Apr 2019