Choosing a mutual fund investment platform – is it an important decision to make when you are starting to invest?
Yes it is.
And the reason is simple – mutual fund investing is a long-term activity. It’s not just about starting a SIP and forgetting about it. You need to manage your portfolio, likely make additional investments, change schemes, monitor performance, and maintain proper meta data (like your personal details recorded in folios). All this would mean that you need an investment platform that you feel secure, familiar and comfortable with.
And given the state of art today in terms of digital interfaces, there is no need for any of this to be a painful experience. And you should not settle for something that is hard to use.
A few years ago, I was talking to a friend on this topic. And I was astonished to find that he was using his absolutely, abysmally poor banking platform for his investments. He proudly declared that he had mastered the art of using their clunky user interface and he knows exactly how to use it. He had just gotten used to the pain of that platform, and was loath to move out.
You don’t need to be like that. While it is true that moving from one platform to another is not that difficult, people seldom do it due to inertia and fear. So, choose right when you get started and stay invested – that would be the prudent thing to do.
But, how does one go about choosing the right platform to use? Let us find out how to go about evaluating mutual fund investing platforms and choosing the one that’s right for you.
Readers who are investing in mutual funds online, and like your platform – please share your experiences for the benefit of others. Please leave a comment below about the platform you use, what you like about it, and what you don’t.
This is not a review of platforms
Our customers have asked us to review some of the investment platforms out there, rate them, and give recommendations. There are a few reasons why we don’t want to do that:
- Much of this choice comes down to personal preferences – in terms of needs, usage profile, and choice of user experience. None of these ‘personal’ metrics can be evaluated scientifically.
- More importantly, this is a fast changing landscape. New platforms come out constantly, and existing platforms are rolling out new features regularly. Whatever we write now will get outdated quickly. For us to keep track of these changes and updating this review would be very hard, if not impossible.
- Equally importantly, doing such a review in the most unbiased way would require us to open an account in our own names and transact through all these different platforms. That would be a bridge too far to cross 🙂
So, rather than do this high cost, low benefits exercise, we decided to rather write about how to do an evaluation yourself and choose the platform that is best suited for you.
Direct vs Regular
No, we’re not going to compare investing in direct plans and regular plans in this article. We have already done that. Rather we are going to talk about platforms that offer direct plans vs those that offer regular plans.
Our recommendation would be to go with a direct fund platform, and use PrimeInvestor as your guide to building and maintaining portfolios.
However, if you like a regular fund platform and you are ok with the higher expense ratio, there is nothing wrong with staying with that as well. But the evaluation criteria for regular fund platforms will be stronger than for direct fund platforms – for the simple reason that they cost you more. Below, we have covered additional factors to consider in this regard. So, do read on.
Platforms to avoid
This one is easy. Avoid mutual fund investment platforms that:
- Are part of a larger financial services entity.
- And offer only regular plans
In all such cases, the MF platform is an afterthought purely built as a revenue-grab, cross-sell opportunity from existing customers of the main platform.
Managing mutual fund investment is not similar to managing a bank account and when the same treatment is given to both, you will end up getting a system that is uniformly bad.
All the banking platforms will fall into this category. So, regardless of how many times your RM tries to sell you a tax-saving MF or some SIP package, avoid. There are much better options out there that would give you more value and, hopefully, better returns. Also, from a platform UX perspective, bank portals leave much to be desired when they try to double up as investment platforms. Managing mutual fund investment is not similar to managing a bank account and when the same treatment is given to both, you will end up getting a system that is uniformly bad.
But, banks are not alone in doing this. Also falling in this category, surprisingly, is the recent offering from a new-age Fintech firm PhonePe – we recommended you to avoid their ‘Super Funds’ offering recently.
Also, avoid investing using platforms of mutual fund companies directly. There was a time once when the only way to invest in direct funds was through AMC portals. That is no longer the case.
The reason to avoid this is it becomes hard to manage over time. You will not get an aggregated view of your portfolio (except through consolidated statements mailed to you once a quarter). And, worse, you will tend to restrict your investments to a handful of fund houses, increasing the AMC concentration risk in your portfolio.
Same goes, to a lesser extent, to MF Utility – the industry-sponsored aggregation platform. There are several better options available commercially outside of MF utility today that you don’t need to rely on the barebones services offered by this platform.
Have your own criteria for evaluating MF platforms? Want to add to the list below? Do share with us in the comments section.
What not to look for while evaluating MF platforms
When it comes to evaluating MF platforms, there are criteria to consider, and there are criteria to ignore. Let’s first look at what NOT to look for while evaluating MF platforms.
- Free : Don’t choose a platform just because they are free. Cost should be a factor to consider, but choosing a platform for that sole reason would lead you astray. Such platforms are businesses that need to have a revenue model – if they don’t charge you explicitly for mutual fund investments, you can rest assured that they will try and generate (likely higher) revenue from you through other means (like cross-selling higher margin products). The exception to this would be services that offer regular plans – which are required by regulations to not charge you extra and are anyway earning revenue from you indirectly through the commission they receive.
- Speed of onboarding/account opening: When I read reviews of platforms, one thing that is often mentioned is how fast and smooth the account opening was. Don’t use that as a metric or an indicator of how an organization works or provides support. In most cases, there are different teams that work on on-boarding and support. And on-boarding is typically a highly optimized business function in such a company. Plus, this is a one-time activity. So what if account opening takes a couple of days – won’t make much difference for your 10-20 year portfolio.
- Cut-off times: Mutual fund investing is a long-term activity. Whether your platform’s cutoff for investing on same-day is 1 PM or 2 PM won’t make much difference in the long run. Don’t worry about it. Remember, you are not trading in mutual funds.
- Fancy UI: Your mileage may vary on this – but to me, fancy app-opening graphics and animation only tells me what the tech team of a platform is focusing on. A smooth UX is important, but fancy animation and effects are best ignored.
A couple of other things to note here. One, is whether a platform offers MFs in demat form or regular ‘online’ mode. Please note that all mutual fund transactions can be done digitally whether it is held in demat or not. So, to me, this is not a big evaluation criteria. Some investors balk at paying demat maintenance fee for mutual funds. But if you already have a demat account and you are a single holder, having MFs in the same demat account should not be an issue. Some of the limitations to having MFs in demat account (like non availability of direct plans) no longer exist.
Also, don’t pay too much attention to the ‘robo-advisory’ services offered by platforms. In my experience, they are weak offerings that are mostly not backed by serious research. And do remember, platforms that offer direct for free or for a small fee are hardly going to invest seriously in research and advisory, unless it is a revenue-generating activity.
You are better off taking recommendations from services such as ours.
Choosing the best online mutual fund platform
So, what should you be looking for when evaluating mutual fund investment platforms. Here’s a list. Please feel free to let us know if you have more, in the comments section below.
- Feature complete: A mutual fund platform should offer a full range of MF services. They may not offer bells and whistles on top of them, but here is a simple, must-have list of services: investments (lump-sum and SIP), redemptions, switches, STP, SWP. Don’t take this for granted. Do enquire and make sure all these are there in the platform.
- Fully digital: All these options should be available digitally without any paperwork. SIP should be available with a one-time mandate that can be reused for future SIPs.
- Full list of fund houses: A platform should offer access to all the fund houses in the country. There is no reason for a platform to pick and choose which fund houses it will make available to you. There are many small fund houses competing out there on the merits of their performance and deserve your investments. Check any of the large bank platforms and you will find some of the small, meritorious fund houses missing sometimes.
- Access to direct equity: If a platform provides access to stock trading, in an integrated manner, it’s a definite plus. Especially with the emergence of ETFs as good investment options, it would be important to be able to manage all your investments in one place.
- Organization of investments: A good investor organizes their investments – by goals, by asset type, by time-frame, or whatever. That is a good practice, and one that advisors recommend strongly. A good investment platform will facilitate such organization by offering some sort of grouping or portfolio feature. In other words, you will be able to maintain separate portfolios based on your goals or needs. Not a lot of platforms offer this, but this can make a significant difference to your investment and portfolio management experience over the years.
- Capital gains reports: Managing capital gains can be a laborious process, and your MF platform should assist you with this. The platform should be able to generate capital gains reports for all your investments made through them at the click of a button. CG reports that you can either use yourself or hand over to your auditor without a second thought.
- Other reports: You will often need access to other ad-hoc reports as well. A good investment platform will need to provide, at a minimum, snapshot report of your investments,transaction reports between two dates and the status of your SIP, STP or SWP instalments.. Annual transaction reports and insightful research reports would be nice, but optional.
- Clean UI: Needless to say, user interface of the platform should be clean, uncluttered, and easy to navigate. Investment process should take no more than 3-4 pages/screens, and the portfolio dashboard should provide a consummate current snapshot of your investments.
- App and Website access: Again, your preference may vary on this. But for me, a service should provide access both via an app as well as a website (laptop/desktop). To me, there are some activities that are more considered than others, and I am more comfortable doing it on a bigger screen. App access is a must for quick verification of status and simpler actions. It would be ideal for a platform to provide both means of interactions.
- Limits on investment: This may not be a big deal for you when you are starting out investing, but in a few years, you may be in a position to invest larger sums of money than a few thousands of rupees. While most mutual funds do not have any upper limit on investing, the payment mechanisms of some platforms may have. For example, if a platform uses only UPI and netbanking for payments, and your netbanking limit for a day is Rs 5 lakh, you cannot invest more than that amount in a day. Do enquire with the platform if they have alternate ways of investing higher sums of money if the need arises.
- Support quality: MF platform are intermediaries. They should be able to execute that function in a wholesome manner. Over the course of your investing career, there will be many times that you will need servicing – change of address, change of banking accounts, marital status, residency status etc. A good MF platform service should be able to take care of all this servicing without redirecting you to a mutual fund house or KYC institution.
Edit: Additions via comments – @pkvarshney has suggested 2FA and security in general should also be used to evaluate. Karthik and Ramesh have said that the ability to consolidate past investments (via upload or transfer) should also be an important criteria. Agree with both. Also, please read detailed, useful comment from Padmanabh Shenoy. Will keep updating as I see such suggestions. Thanks!
This might seem like a long list, but trust me, every one of these aspects will come into play at some point of time in your investment journey. You don’t want to be struggling or left without options when the need arises.
Additional criteria for MF platforms offering regular plans
If a platform offers only regular plans to you, then you should expect more from them. Why? Regular plans, over the long term, end up costing you more. And for what you are paying, you should get more from these services. So, what more should you expect?
- Advisory services: Although there are regulatory strictures on what level of advisory services such entities can provide, you should expect some personal counseling from such platforms. A review of your existing MF portfolio, risk profiling you and creating portfolios for your needs, periodic maintenance reviews, and assigned advisor are some of the services that you should ask for and be provided with.
- More than just feature complete: You should expect such platforms to be luxury versions of your regular MF platforms. Flexibility of SIP investing, ability to manage family investments, research services, alert mechanisms on market movements, automated insights into portfolios – any and all combination of these features should be present in the platform to give you powerful options.
Choosing a platform for investments is different from choosing a platform for, say, loans or insurance. The latter activities are very infrequent activities, but investments are something that require regular monitoring and upkeep. So it’s important to choose right. Hope this list of evaluation criteria will help you make a wiser choice. Much of this article was driven, naturally, from my own experiences creating and managing a mutual fund platform at FundsIndia.
Disagree with my list? Have your own criteria to add? Let us know in the comments.