Choose platform based on services
Paytm’s new wealth management app, Paytm Money, will allow you to invest in mutual funds (MFs) offered by the 12 largest asset management companies (AMCs). Paytm recently received approval from the Securities and Exchange Board of India (Sebi) to become a registered investment advisor.
Paytm Money will sell only direct MFs, with no charges up to a certain limit. “We are trying to make wealth management easier and more accessible to the masses. Till a certain investment limit, Paytm Money will not carry any fee. Beyond that there may be a small transaction or subscription fee,” said Pravin Jadhav, senior vice-president, Paytm.
Paytm enjoys certain inherent advantages. Its mobile wallet has a mammoth user base of 300 million. All the AMCs in India together have only 15.5 million investors. “Paytm has a large existing customer base, and also enjoys high visibility. So it should be able to reach out to a large number of new customers,” said Nikhil Banerjee, co-founder, MintWalk, which offers a mobile MF investment app. Banerjee said Paytm would be able to reach out to the bottom end of the market that may want to make small-ticket investments. They may also be able to make MFs accessible to those living in smaller towns. Says Jadhav: “India’s wealth management industry has focused mainly on the urban segment so far, leaving a large chunk of the market untapped.”
One thing you should know is that investments will not be made from the Paytm mobile wallet, as many are assuming. You will have to link the app to a bank account. The app will also be a separate one and will have to be downloaded (you will not be able to invest through your existing
Paytm app). Also, Paytm will not offer advice, at least not initially. If you are looking for advice too while investing in direct funds, you will have to turn to some of the other players in the market.
Currently, there are a large number of online platforms that allow you to invest in direct funds. Some of them are free of cost. When you invest in direct funds through AMCs’ own websites, or use platforms such as Mutual Fund Utility (MFU), CAMs or Karvy, you don’t have to pay any fee.
Some of the other players charge a fee for their services, in lieu of which they also offer advice. Clearfunds.com charges ~199 every time you invest a lump sum or start a fresh systematic investment plan (SIP), irrespective of the amount invested. They also have a ~999 per year plan that comes with portfolio recommendations. Kunal Bajaj, CEO and founder, Clearfunds.com, a Sebi-registered online investment advisor, said, “We use big data forecasting techniques to pick funds that will be top-quartile performers for the next couple of years.”
Invezta lets you invest in direct plans for free up to ~50,000 a year, above which they have two charges: ~948 per year from those who wish to do transactions only, and ~1,308 per year from those who want both transaction service and advice. Their fund selection, too, is backed by data analytics. They also provide services such as asset allocation and portfolio rebalancing.
Do not choose your investment platform based only on the fee it charges. Assess the level of help you need with, say, choice of funds, portfolio construction, rebalancing, etc, and choose a platform that offers the appropriate level of service. If you also need handholding and emotional support when the markets are going through a turbulent phase, opt for a human advisor. Go to a Sebi-registered investment advisor to get your portfolio prepared, and then use one of the free online platforms for execution.