Zerodha Coin Review – Invest in Mutual Funds without commission

Savings

We as homo-sapiens do cultivate a habit to save for rainy days. This habit becomes a saviour when we see ourselves in a financial crisis. In older days, people used to save in their home, dig the ground and safely put money/jewellery so that it may be away from thieves. It was a good way but the savings never increased. Means the cash saved in a home remains same in context of figures. This brought the idea of banking system. While saving, it’s an added intention to get a bit more than what we saved. On the other hand there were people who needed money for their startup ideas. Banking system brought them together. So people who save their money in bank started getting some interest on their savings. On the other hand, banks started lending money to the ones who needed money for their requirements. Banks get interest and compound interest on the money they lent. Banks also started investing in stock markets and other platforms to earn money.

There are several on-going schemes by the government for savings. All of them are intended to get you save your money and get some addition to your capital, at maturity of those schemes. Some schemes are based on tax savings. They were introduced to eliminate tax deduction by investing in those schemes. So the intended idea of increase the capital while saving is getting fulfilled.

⇯

Mutual funds

Recently people have been attracted too much towards stock markets because of the returns they get from it. Trading and investing in stock market became a norm. Banks and other domestic institutions also invest in stock market to pay returns to their clients.

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature.

In 1963 Govt. of India in collaboration with of Reserve bank of India (RBI) formed Unit Trust of India (UTI). This was the first mutual fund in India. In 1987 State Bank of India (SBI) introduced SBI Mutual Funds which became first non-UTI mutual funds in India. In 1992, Securities and Exchange Board of India (SEBI) came into existence. 1993 onwards private companies also started trying to sell mutual funds. After SEBI Mutual Funds Regulations came into existence in 1996 several companies have started to sell mutual funds and its increasing year by year.

When you put your money in a mutual fund it is called Asset Under Management (AUM). These AUM are collectively then invested by an expert appointed by the company. This company is called Asset management company (AMC). Meanwhile, several mutual fund distributors popped up as a bridge between investors and AMC.

⇯

Mutual funds – Why you should invest

Simple Savings

You can put your money in mutual funds just to make a simple savings like you do in a bank.

High returns

As compared to banks’ interest, return you get on mutual funds is much higher. Different mutual funds provide different returns but they all are indeed higher than a bank.

Expert’s managed

As an investor, you need not do much research on stocks. It’s all done by an expert think tank appointed by the AMC. You just have to be very clear about your objective of investment. Every mutual fund is designed keeping an objective in mind. Find the one that matches your objective then go ahead for investment. Rest will be taken care by the experts at AMC.

Less Risk

When you decide to invest directly in stock market you have to do your own research about stocks. You find the suitable ones and invest. This is a time taking process and what if your chosen stock don’t behave the way you thought it would. Your money is in a loss. In contrast to this situation, a mutual fund is diversified in context of the industry of chosen stocks. So, if a news bring bearish moment for one industry the same news may bring bullish moment for another industry. In mutual funds, if these both industry stocks are packed you will be profitable anyway.

Affordability

You can start your investment in mutual funds as low as Rs 500. Different mutual funds offer different minimum investment amount.

High Liquidity

Experts at AMC choose stocks based on their liquidity too. Liquidity means how quickly you can get your investment back if needed. So you don’t have to worry “what happens if I need my money in sudden personal financial crisis”. Different mutual funds have different terms and conditions so you need to read them carefully.

⇯

Mutual funds – Why you should not invest

You don’t have a habit of saving

If you haven’t saved ever before because of well thought-out and precisely planned future, there may be case where you have to face a sudden financial crisis. This may be injected by your haters through higher authorities, on which you don’t have any control. I faced it and if you don’t want to save because of any reason, its the time to re-think about cultivating the habit of saving. No, its not the case that you are going to face a financial crisis in somewhere near future but what if that really happens. What will you do? Even if you are ready for the worst case scenarios, what about your internal satisfactions in those worst case scenarios. What if someone you find reliable and respectable, repeatedly calls you a “parasite” in those financially worst moments to demoralize you. That won’t be acceptable, right? Even if you are a man enough to build anything from scratch and have the confidence and guts to get up from the ground and move on, still such incident may leave an un-healable scar and an experience you will never forget. Thus its good to develop the habit of saving so that history should never clone itself in future.

You like saving in your bank

Its ok if you find that your money in the bank is safe and you are satisfied with low-interest rate of your bank. But do you know that in India, in case your own bank’s failure (Its NPA becomes too much than it can afford), only 1 lakh of your own saved money is insured. The bank is liable to return only 1 lakh of your money and deny the rest in case it fails to operate anymore. So think once again. You are still putting your money at risk. Why not choose a platform to get a good return on the money you have in your bank.

You like investment in stocks separately

In case you are a very good market analyst, you love to find good stocks and trade/invest in them yourself. That’s good but even then you must be had been in deep worries when things didn’t go as you expected. Mutual funds will bring you out from those worries as your portfolio is diversified.

You think stock market will put your money at risk

Yes! there are lots of myths and fears rumouring around the world regarding stock market. These fears have grown along with the evolution of stock market itself. Like today, even in the past, these propagandized fears had acted like a crab and never let lots of people enter stock market. FundsBase is glad that it has successfully busted these myths and fears regarding stock market. Read it, you will feel relaxed. Stock market is too simple. So start investing in stock market.

You find returns are quite low as per your expectation

If you have researched all the mutual funds and find that the returns are still low to your expectation, then this article is especially dedicated to you. Zerodha coin has eliminated the commission investor used to give to mutual fund distributors. With zerodha coin you can directly invest in mutual funds of AMC, thus can increase your returns.

Happy 🙂

FundsBase recommends to read – Reasons for stock market

FundsBase recommends to read – Basic requirements for stock market

 
⇯

Mutual Funds Investment

Investment in mutual funds can be done in two ways-

Through Distributor

Usually, when you invest in a mutual fund from a distributor, you pay a commission you are not aware of. This commission is 1% upfront when you invest and up to 1.5% per year. So the more year you stay invested in mutual funds the more commission you are giving to the distributor. These commissions are the main reason that from your bank to your broker, everyone is asking you to invest in mutual funds. They get 1% as soon as you invest and up to 1.5% every year as long as you remain invested. They get this yearly commission by AMC from the part of your capital gains. Means you get lesser capital gains on mutual funds if you choose a distributor. Distributors take away a part of your capital gain.

You may be aware of the upfront 1% commission to the distributor because we all know that if someone is selling something to us there has to be something he is getting in return but you have definitely not known the above mentioned 1.5 % every year commission. This commission is called trail commission. In a mutual fund as a norm, we usually invest for a long time. So the longer the period the higher the trail commissions for the distributor.

Exempli gratia if you are doing a SIP of Rs 5000 every month for 25 years, can you imagine that you have paid approx Rs 30 lakh to your distributor as commission which is almost 20% of your corpus. This example is considered taking into account that you make 15% per annum compounded return and pay 1% upfront and just 1% trail commission.

I hope this example has opened your eyes wide as to how much you have given commission to your distributor from your investment.

Direct

Choosing investment in mutual funds directly means you bypass distributors and contact AMC directly. When you choose to invest directly in mutual funds, you don’t have to pay these commissions. So your capital gains increase. To invest in mutual funds directly you can visit the funds house office/website directly, fill up the form and invest in the funds.

But it as lots of drawbacks and work needed when you do directly at fundshouse viz.

Sign up multiple NACH forms

Systematic Investment Plan (SIP) is a regular monthly investment in a mutual fund. This can be a saviour when a financial crisis occurs. When you choose a SIP from direct mutual fund investment, you need to sign multiple NACH forms for each SIP of every mutual fund. This is quite hectic when you actually sign up the forms instead of just reading this article 🙂

Difficult to stop SIP

Just like it is difficult to start a SIP, in the same way it is very difficult to stop the same. You have to do a lot of paperwork and exercises before it actually gets stopped. Yes, it is difficult.

Investment tracking

We choose different mutual funds as per our different objectives. Means we choose various mutual funds. It becomes quite a problem because no AMC provides a platform to track the mutual funds of other AMC as well. So in case you make investments in more AMCs, you may find it difficult to track all of them.

Make your own statements

When you file returns you need to make capital gain statements as well if you have invested in stock market. In case you have invested in mutual funds directly, just like you have the problem tracking them, in the same way, you face more problem getting the capital gain statement.

Above all, in case you don’t get mutual funds in demat form, you will have to store it in a safe place as well.

Here zerodha coin comes into the picture, but I think before you go through zerodha coin let’s have a look at what zerodha is? In case you are aware of zerodha, you can jump to Zerodha Coin section.

⇯

Zerodha stock broker

In 2010 SEBI sensed that traders/investors don’t want all the financial services apart from the trading platform. Thus it introduced discount brokers. A full-time broker apart from trading platform provides financial pieces of advice too whereas a discount broker only provides a trading platform. You can read more about full-service vs discount broker.

Nithin Kamath, a full-time trader saw this opportunity provided by SEBI and established zerodha in August 2010. As per his own words he had faced lots of obstructions as a trader thus decided to establish a platform without those obstructions. This idea was behind the construction of the term “zerodha” as well.

zero + rodha (means “obstruction” in sanskrit) = zero obstruction = zerodha

Maybe a detailed zerodha review will give you more satisfaction.

Open account with zerodha

To open an account with zerodha you can directly visit zerodha website and fill up the registration form online.

You can have more information on zerodha account opening.

Zerodha account – Why you should open

1. Best discount broker in India.
2. Minimum brokerage. For delivery based it’s completely free. For intraday its 0.01% or Rs 20 whichever is lower, per trade.
3. Best online trading platforms with most advanced technology.

Read all 12 (twelve) reasons to choose zerodha

Zerodha account – why you should not open

1. You are seeking trading tips from your broker.
2. No installable platform available for Linux and Mac. Still you can use Kite on your browser.

Read all 4 (four) reasons not to choose zerodha
⇯

Zerodha Coin – Mutual fund investment without commission

Recently SEBI allowed the demat forms of mutual fund and opened the doors of exchange platforms to buy-redeem mutual funds. This opportunity, added with an active client base gave zerodha confidence to take an initiative of Coin project. Nithin Kamath says that it was the loyal client base of zerodha that allowed him to initiate a commission-free mutual fund investment.

In March 2017, Zerodha announced Coin, a platform from where you will never have to give upfront 1% and trail 1.5% commission to anyone. It’s your money that you are going to invest. Why someone else should take a part from your capital gain while he is practically almost doing nothing. It’s you who is investing the money (AUM) and it’s AMC experts who are wisely investing the AUM in diverse portfolios. Zerodha gives the credit of introduction of Coin to its wide and loyal client base.

Coming back to the example given above. You give Rs 30 lakh as a commission of Rs 5000 SIP to a distributor. If you invest in mutual funds directly using zerodha you will not have to give your Rs 30 lakh to a distributor. You will pay only Rs 50 per month as a fee for subscribing coin and keep this low-cost coin infrastructure up and running. This fee is only applicable once you reach the investment of Rs 25000. The fee of Rs 50 per month becomes only Rs 15000, in 25 years as compared to Rs 30 lakh commission you give to a distributor.

In case your investments are below 25000, you don’t have to pay even the fee of Rs 50. 

Buy-sell mutual funds at Zerodha Coin

To buy mutual funds directly from AMC through zerodha coin you need to have sufficient money in your trading account. Search for your preferred mutual fund then buy it from coin platform directly. Money will be debited from your zerodha trading platform.
When you sell the mutual funds, the money will be credited to your trading account.

SIP on Zerodha Coin

You can also start-stop your preferred SIP from coin platform very easily without having to sign any NACH form. Find your preferred SIP and start by paying directly from your trading account. Zerodha currently doesn’t support to debit money from your bank automatically for the SIP. To make sure that your trading account has sufficient funds for SIP payments you can give instructions on your bank website to transfer the required money to your zerodha trading account before the SIP date.

Open trading account

Zerodha Coin – Why you should choose

1. No commission on your investment. Neither upfront or trail. Completely commission-free investment.
2. Mutual funds in demat form, in your demat account. No worries to place it secured somewhere.
3. Single capital gain statement.
4. Profit and Loss visualizations
5. Easily start SIP. No signing up lots of NACH forms. You can also modify or stop any SIP with easy steps.
6. Track orders based on NAV. You can place an order to purchase mutual funds or redeem them just like you do with stock market based on NAV performance.
7. Completely free mutual fund purchase-redeem until Rs 25000. After Rs 25000 pay only Rs 50 per month for subscribing to coin and keep the system up and running. It doesn’t matter how many or from how many AMCs you purchase-redeem mutual funds, you will never pay more than Rs 50 per month.

Zerodha Coin – Why you should not choose

1. You have so much money that you don’t even care giving 1% upfront and up to 1.5 % trail commission.
2. You like to a have hard copy of mutual funds at your home.
3. You are too loyal to your brokerage company to switch to zerodha 😉

⇯

Summarising

⇯