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HindustanTimes Tue,16 Sep 2014

Should you buy online mutual fund bundles?

Kayezad E Adajania, Hindustan Times  New Delhi, November 16, 2013
First Published: 08:23 IST(16/11/2013) | Last Updated: 08:29 IST(16/11/2013)

When you buy mutual fund (MF) schemes online, you still have to choose one scheme over another. There’s a chance that your choice may or may not work out for you. But here’s a new way of buying funds; you define a financial goal and your distributor gives you a pack of MF schemes.

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Think of it like buying a packaged holiday deal. Instead of just booking a room at first and then choosing add-ons, you buy a packaged holiday that gets you what your hotel thinks you’d like the most, such as a room, two meals a day, half a day sightseeing, one or two activities and the works. Similarly, online start-up firms are now offering MF schemes in a bundle.

What’s on offer?
All you need is an Internet connection and — in most cases — Internet banking facility. When you visit their website, open an account just like getting a new email account, select a financial goal that best meets your needs, enter basic details like your target amount and number of years left to reach your goal; your seller, then, offers you a bunch of MF schemes that you need to buy.

At present, the three main firms in this space are Fundsindia.com’s Smart Solutions, Scripbox and I-CAN Financial Solutions.

I-CAN aims to help you plan for goals such as wealth creation, retirement, child education, to buy a home and to purchase a car.

Smart Solutions too offers goals like education, marriage and retirement, in addition to Shubh Aarambh (an auspicious beginning) or mainly targeted at first-time investors in MFs.

“Goal-based investing is actually the right way to invest in MFs. It brings more credibility to investing,” said A Balasubramanian,CEO, Birla Sun Life Asset Management.

“We felt that so far funds were being sold as individual products; new schemes are sold on the basis of commissions. We wanted to move more towards the solutions mentality,” said Rajiv Singh, chief operating officer, I-CAN.

Tracking your goal
Goal-based MF sellers periodically review their recommendations. If the firm makes any changes, it sends you an email nudging you to change your own portfolio. Within a handful of clicks, you then have the option to make changes.

“If you’re doing a systematic investment plan (SIP) in a scheme which goes out of the portfolio, our system automatically stops your SIP in that scheme and starts a fresh one in the new scheme,” said Srikanth Meenakshi, founder and director, FundsIndia.com.

“We only prompt you to change your schemes and asset allocation. We don’t do it ourselves since we aren’t mandated to do that automatically”, said Sanjiv Singhal, co-founder and CEO, Scripbox.com.

I-CAN doesn’t yet allow Internet banking. So it prefills your new forms online; you need to take a printout, sign them and courier them back to I-CAN.

If you make changes on your own, without the seller’s advice, there are checks and balances here as well. For instance, Smart Solutions doesn’t allow you to withdraw from any of its schemes as per your whims. If you wish to withdraw, it gives you money from all of your schemes proportionately — based on an internal complex matrix it has worked out — to ensure that your asset allocation doesn’t get disturbed. I-CAN allows you to withdraw from individual schemes that are a part of the package, but it prompts you to re-define your goals with a fresh tenure and suggests you any modifications.

Is it meant for you?
Online goal-based solutions firms are looking to fill the space between an investor who doesn’t necessarily have the wherewithal to afford a financial planner and someone who has a financial planner.

Singhal of Scripbox — with just one basket of four schemes — says that “anyone who is a first time MF investor and who has about 15 to 20 years of investing to go is our potential customer”.

If you have a strong view of which schemes you want invest in and which ones you don’t, avoid these sellers. Or, if you are uncomfortable with using Internet banking, stay away. “People who are at a critical juncture of their lives, like someone who’s just about to retire may also avoid such firms as in that point in time they need deep financial advice,” adds Singhal.

The distribution landscape is spreading fast online. How well their recommendations work and whether they help you meet your goals is something we’ll know only in a few years, but it’s better to start investing now than putting it off.


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