Cut out intermediaries to do your own investments
Making a transaction through online platforms is easy and usually take less than a couple of minutes
Till a few months ago, Gurgaon resident Pramod Shukla, 35, invested in mutual funds through the relationship managers of his bank. The process was tedious and time-consuming, as he had to schedule meetings with a relationship man­ager for filling up application forms and signing cheques. The investment too was not instant as he received mutual fund units only after couple of days. He was also skeptical of the investment advice as relationship managers mostly pitched new fund offers (NFO) to him.
His growing interest in capital markets encouraged him to proactively manage his investments. Today, he is a member of fast growing club of do-it-yourself (DIY) investors. These investors prefer to build and manage their own portfolios through independent online portals. Just like Pramod, you can also benefit from managing your own investments. Here’s why you should take the online DIY route for your mutual fund investments:
Same day's unit price: This is the biggest advantage of DIY investment over traditional offline investment. As the online investment portals have tieups with most banks, the purchases and withdrawals of units are almost instant because of the internet banking. But the transactions have to be completed within the cut-off time. This feature is especially helpful in case of market crashes, as the units will be allotted the same day.
Convenience: DIY investing through online portals saves you from the hassle of setting up appointments with your investment advisor, filling up paper application forms, cheque clearance, etc. Online portals also provide 24x7 access to transact and monitor your entire portfolio. These portals can also be accessed on smartphones. Moreover, these po­rtals also provide quality research and report to help you ma­ke sound investment decisions.
No scope of mis-selling or human bias: A portfolio suggested by your advisor will contain funds that he feels good about. As a result, your portfolio will be exposed to your advisors’ bias, which may compromise your own unique financial goals and requirements. In a worse scenario, your advisor may recommend funds based on his or his employer's compensation requirements, as is evident in case of NFOs. This could go agai­nst your interest. Similarly, advisors may also resort to unnecessary portfolio churning to earn upfront commissions. It may impede long-term growth of your portfolio.
Most investment portals today offer robo-advisory services. These are automated investment advisory service without any human involvement. They assess your risk profile with the help of highly advanced computer programs armed with algorithms and analytics and then, suggest your asset allocations and fund selections accordingly. This helps in ruling out the possibility of human bias and mis-selling, usually found in the traditional advisory model.
Access to impartial information: Critics of DIY investing allege that investment decision-making is not every one’s cup of tea. One has to consider various factors like his financial goals, macroeconomic factors, market conditions and the reason behind the performance (or underperformance) of mutual funds. According to the critics, common investors should take help from relationship managers or advisors for proper investment decision-making.
But this criticism fails to stand today as due to the proliferation of the internet, retail investors can access the same information that professionals have. Today, market quotes, earnings reports, stocks charts and educational tips from world’s top investors are readily available on the internet. Unlike the past, improved access to market information allows you to take independent investment decisions without the bias of market intermediaries.
Online portals also provide online financial calculators to help you ascertain the quantum of your investment for achieving diverse financial goals. With a sustained effort to learn from the available resources and the willingness to take calculated risks, your investment skills will steadily improve over the time.
Zero cost of investment: Although most offline fund distributors don’t charge any advisory fee, online platforms of some stockbrokers and commercial banks charge investors in the form of annual management charges (AMC) or transaction fees. But most DIY platforms are free. They do not charge any AMC or advisory fee for their services. Some online portals are also offering direct plans, which have lower expense ratio than regular mutual fund plans.
DIY investing in mutual funds is not as complex as most think it to be. Unlike stock selection, all that you have to do is to select funds on the basis of their past performance and how their investment objective aligns with your financial goals. The funds-related information available on your portal and other web sources will help you to decide yourself. Making transactions through online platforms is easy and usually takes less than a couple of minutes.

(The author is chief executive officer and co-founder of Paisabazaar.com)
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