Earlier taking note of the difficulties faced by investors while selecting mutual fund schemes, SEBI has asked AMCs to rationalize and recategorise schemes. And now, direct mutual funds are being sold and promoted across mobile apps to make the overall process of buying and selling mutual funds convenient as well as hassle free. Plus the ease of transaction and cut back on expense cost works in the favour of investor.
Within a span of short time many such apps have come up including the likes of Coin, Piggy, Sqrrl, Groww and the latest Paytm Money that can be downloaded to get started with mutual fund investment.
Process to start investing in direct mutual fund plans via mobile app
It is a simple process and after the user has completed the initial signing-up step using his or her personal credentials such as name, e-mail and mobile number, to get started with investment one needs to complete the KYC verification. This can be done using PAN or aadhaar.
During the KYC verification which is entirely paperless, users need to enter their PAN after which the app checks as to whether they are already KYC compliant or not. In a case when the person concerned is already KYC verified no more action is required and he or she after providing bank details and begin their investments.
In the other case, when the PAN number is not KYC verified, the process has to be completed by furnishing aadhaar details. The eKYC process requires no physical documents and verification is completed via Aadhaar-based one time password (OTP).
These mobile apps offer convenience of making investment into direct plans while on the go. In case the user is already KYC verified, the investment can be started in less than 10 minutes. Also, investors can easily track and manage their portfolio. So, in a way the platform is being viewed to engage more investors from smaller cities who using these mobile apps will be able to channelize their savings into direct mutual fund plans.
Such mobile apps dealing in direct mutual fund plans will be offering more generalized investment services. So users looking for customized offerings will not be duly served.
On these apps, there can be seen heightened penetration of mutual fund schemes which owners of the app are promoting either as top funds or recommended portfolio. Thus, users can expect biased advice from such apps.
Further, mobile apps for direct mutual funds lack quality research inputs as well as a majority of them do not provide risk assessment for novice investors who can then select plan as per their risk profile.
Some of the apps do not provide risk ratio inputs for investor's analysis while others are recommending funds based on last one-year performance only.
Also, these apps are not being updated on a regular basis and there have been seen errors in the stock portfolio of many schemes. In some of the apps, the return from mutual fund plans is being highlighted for say one or three years despite scheme's existence of over 5 years.