This is the latest offering by ZERODHA for purchasing mutual funds. Lot of you should already be aware that they already have a platform called mf.zerodha.com, so why a new platform. The major difference between these two is on COIN you will buy DIRECT mutual funds and mf.zerodha.com was providing regular mutual funds purchase.
Most of you should be confused by know as to what is the difference in between these two. I will try to explain it in simple terms. So when you buy regular funds, there is no brokerage charge or extra fees you have to pay but there is still a upfront commission and trail commission which the agent receive. So in this case, when you are buying regular mutual funds from mf.zerodha or any other stock broker, there is an upfront commission and trail commission which is paid. This commission is not deducted from your funds deposited but gets reflected in the NAV of the regular fund. Will explain this is detail below.
Compared to this, while purchasing direct mutual funds, there is no commission paid to anyone. What is means is 100% of your funds directly goes to AMC. So, NAV for direct mutual funds are always higher compared to that of regular funds.
We will try to explain it with an example so that it make more sense. Suppose you brought a NFO of ICICI Prudential Growth Fund – Series 2 which was launched on Aug 1, 2014. If you brought it through a broker or direct through AMC, the price you should have paid is Rs 10 per unit. The NAV for regular fund on Mar 28th, 2017 is Rs 12.81, giving it a total return of 28.1%.
The NAV for the same fund would is Rs 13.31 if you would have brought a direct fund either through AMC or some service which provide direct purchase of MF. In this case, they return was 33.1% for the same time.
The difference of 5% is what was paid to the brokerage house through which the MF were purchased. Even if you brought it through ICICI bank thinking that you are not paying any commission, you still ended up paying 5%. The issue with this is most of the user purchasing this NFO are not aware of this. Even later, if client would have checked the price of his fund, it would have shown as 12.81% for regular fund and there was no way to know that you are paying any commission.
Still have some question, do have a look at our video review of Coin by Zerodha
Zerodha is trying to do something commendable here but the task is difficult as not many people are aware of difference between direct and regular funds.
With COIN, Zerodha is using BSE Star Mutual fund platform and they will charge a flat fee of Rs 50 per month if your portfolio of MF is more than 25,000. Many people would have issue with paying the fees. But if we look at the commission people are paying, Rs 600/year charge is a steal. Even if you have a MF portfolio of Rs 30,000 you are paying upfront and trail commission of more than Rs 600 per year.
But if you are not comfortable to pay these 600 Rs, then you can always buy direct mutual funds from AMC or use MFUtility.com to buy funds directly. But with Zerodha, you will get the benefit of keeping all your holding at one place and doing SIP with Zerodha is very easy compared to MFUtility.
To know more about COIN platform or opening account with Zerodha