One awesome utility of the internet is it has made things easier. Especially investing in mutual funds. We shall check how to use MFUtility to invest in mutual funds online today.
Prior to digitization, there were only a couple of ways to invest in mutual funds (MF). You either approached an individual agent or bought it from the nearest branch/office of your bank, registrar or asset management company (AMC). The approval process and registration/allotment of units took time.
Some fund houses didn’t allow first-time investors to buy units from their site. You either applied through their offices or registrars, or subscribed through approved distributors
If you wanted diversified portfolio, you filled more forms and wrote a fresh cheque for each investment. Thank God (or AMFI/SEBI) those days are gone.
You can now invest through demat route, online distributor sites, or mutual fund websites.No more laborious paper hassles or visiting MF offices/distributors.
Things changed in January 2013 after SEBI made direct purchases of mutual funds mandatory. Companies renamed original schemes as regular plans and created a new scheme – direct plan.
MF Utility – Online investing in mutual funds
You should be KYC ((Know Your Customer) compliant to buy Direct Plans online. Then you can –
- Create account at fund website to invest in company plans.
- Apply online on registrars sites such as Karvy, Franklin and CAMS.
- Use transaction aggregators such as MF Utility
What is Direct versus Regular Plans of mutual funds
Regular Plan – You indirectly pay brokerage fees while purchasing scheme from mutual fund advisor or distributor. This amount is generally transferred by the company as commission to those agents. Each year they earn a trailing 0.75-1% commission on your total investment.
Direct Plan – You bypass third-parties, deal directly with relevant companies and invest in their plans. This way you save on those extra fees.
What is MF UTILITY and how to use MF Utility?
MF Utility and other robo advisors (Iventza and Unovest) allow you create an account and buy Direct Fund units from different fund houses or AMCs under one roof.
Are you’re wondering whether these sites are free?
MF Utility (MFU) is a free portal started in January 2016 and sponsored by 25 AMCs belonging to Association of Mutual Funds in India (AMFI). The site enables you to purchase, transfer, sell/redeem units and keep all records in one account.
You can choose browser or free app based application – goMF (Google Play) – to connect with fund houses, KYC registration agencies (KRA), transfer agent and registrars (RTA), banks and payment gateways.
The portal maps your existing MF folios based on holding pattern and PAN.
Things to do before you CAN open an MFU account
- Register details under KYC regulations. Download forms from portal, fill them up, and submit at MFU POS (point of service). Separate forms are available for individuals and others.
- Get CAN for login access. You are allowed multiple CANs (single and joint holding). CAN is non-transferable, except to heirs on investor’s death. Primary holders can transact through MFU, while second and third holders can only view MF details in their accounts.
Benefits of CAN (Common Account number)
CAN serves as a universal reference number for all your mutual fund investments using PAN. This unique folio number is a combination of number of investors, type of MF holding, mode of holding (single, joint, anyone) and status (resident, company or individual).
Your CAN holds important details required for MF plans such as name (including secondary holders) and nationality, contact info of primary holder, income details, KYC and tax status, modes of holding, nominee(s), bank account(s) registered with CAN, Depository Account details, info on guardians for minors, and details on Power of Attorney, FATCA and OECD.
Example1: Meena invested in plans from 5 different AMCs. She tracks these with an Excel sheet, but finds information lacking. Consolidated statement doesn’t reveal investments with lack email id.
With CAN, she can track her earlier and new investments.
Example2: Mahesh wants to change bank or address details across mutual funds. He has to fill separate request forms for each AMC.
With CAN, he can make a single update at MFU which is reflected in all investments.
Example3: Sanjay finds it tough to track emails and messages about FATCA compliance.
With CAN, he can fill details for FACTA once and have it across folios.
Popular post: Top 5 best balanced funds in India
Enrolling in MF Utility for direct Plans
This portal has a host of facilities for customers who want to invest on their own.
- KYC registration forms
- CAN registration forms including eCAN option
- CTF (common transaction form) and single payment for all MF transactions
- Physical and electronic modes of payment including PayEezz(standing instructions to MFU), Netbanking, NEFT and RTGS
- Combined view of MF investments, including those that can’t be transferred to portal
- Transfer of Direct Plan units to demat account and vice versa
- SIP (Systematic Investment Plan) registration
- MF transactions including purchases, transfers, switches and redemption
- Other transactions – changing bank accounts or addresses, or changes through KRA using written requests
CAN registration ON MFU portal
- Go to investor menu on home page and click on the Click Here link to use various CAN filing and uploading links.
- You have three options available on the MF Utility User Registration page –
- With FillEezz, you add some details on html page, download the filled CAN registration form as a PDF, sign it, attach proof documents, and physically submit it at MFU POS or office at Thane, Mumbai.
- Before you add details on the portal, read this step-by-step guide. Go the FillEezz page and click on new form. This will take you to a page where you fill necessary details.
2.The details include your info as Primary Holder like Name, PAN, date of birth, Aadhaar, (KYC reference number for PAN exempt), contact details, tax status and holding status.
3. If you add more than one holder, fill details of second and third holder.
4. Add details about each holder, including gross and net income, its sources, occupation, KRA status and FATCA.
5. Fill your bank details.
6. Followed by nominee details
7. Add Depository account details if you have one.
8. Click on Save to retrieve it again for modification and submission later.
9. Or click Finish and Submit. You will get confirmation message on generating your fillable CAN registration form with details of missing data and documents to be submitted by you.
10. You can choose to print the form or get it emailed to you.
- Create an eCAN by filling form on portal. Before you add details on the portal, read this PDF.
- Go to eCAN page and click on new form. This will take you to a page where you fill necessary details. Repeat steps from (c) holder details to (g) nominee details, mentioned in previous section.
11. Click on Save to retrieve it again for modification and submission later.
12. Click on Submit for eCAN to generate eCAN. If there are errors, you will be asked to rectify. If there are no errors, you will get a Provisional CAN.
13. If you choose complete eCAN option, you’ll get this message.
14. Upload relevant document proofs as images through link provided in email. After verifications, CAN will be activated.
15. If you choose Partial eCAN option, you’ll get this message –
16. Print the eCAN registration form, sign and submit relevant document proofs to MFU authorized entity or MFU POS for processing. After verifications, CAN will be activated.
How to Transact with MF Utility – Review
At present, login facility is not automatically available. After obtaining CAN, send an email to [email protected]a.com. You will receive an SMS or email in 2-3 days with details on how to login. Access your account at https://www.mfuonline.com/.
With MFU account, you can:
- Buy, switch or redeem lumpsum units.
- Go paperless by creating PAyezz mandate account. You need this for SIP transactions
- Start SIP, Systematic Transfer or Systematic Withdrawal for new investments
- Set virtual bank account on site to transfer funds or make payments through NEFT or RTGS
Benefits of Direct Plans of mutual funds
Although investment portfolios and taxation rates are same for both regular and direct MF plans –
- Direct plans have a lower expense ratio (charging 0.5-1.0% less) as commission amount is not built into scheme.
- These plans have a higher net asset value (NAV) compared to regular plans, as this value is calculated after fees and expenses.
How does a lower Expense Ratio translate into better returns?
This ratio is the amount that mutual funds charge for managing investor money. The expenses include fund management fee, selling and promoting expenses, registrar fee, and agent commission. This amount is a certain percentage charged annually and changes every year.
* Equity funds cannot charge more than 2.5% of average weekly net assets while for debt funds this limit is 2.25%. *
A higher expense ratio means you pay more fees per year and this eats into your returns due to the compounding effect.
Some additional info on MFUtility can be obtained on a good article I found here
Should you invest in Direct plans of mutual funds?
|Fund Name||TYPE||NAV||Avg. Expense Ratio||Annualized Returns|
|1 Yr.||3 Yr.|
|ICICI Pru Focused Bluechip||Large||31.10||2.17||11.43||15.75|
|ICICI Pru Focused Bluechip – Direct G||Large||32.21||1.15||12.54||16.83|
|Franklin India Prima Plus||Multi||464.33||2.27||8.39||20.99|
|Franklin India Prima Plus -Direct G||Multi||481.42||1.10||9.62||22.21|
This table provides overview of basic advantage of direct plans over regular plans of the same scheme.
As you can see in both schemes, Direct Plan has higher NAV, lower expense ratio and higher returns.
Example4: Satish invests Rs 50,000 in regular plan fund with 2%. expense ratio and 10% yearly return. Gauhar invests same amount in direct plan with 1.5% expense ratio and 10% return. What is their –
- Respective fund charges?
- Net returns (actual returns less fund charges) for first year?
- Net Returns after 15 years?
A: At 10% yearly return, both funds will generate Rs 55,000 at end of first year.
- Satish pays Rs 1000 every year to manage the fund while Gauhar pays Rs 750.
- As returns are calculated on annual compounded basis, net returns for first year – Satish Rs 54,000 or 8%, but Rs 54,250 or 8.5% for Gauhar.
- After 15 years – Satish’s net returns will be Rs 1,54,259 or 7.8%, while Gauhar will receive Rs 1,66,496 or 8.5%. Satish will get Rs 12,237 less (7% difference).
Example5: Satish invests Rs 2000 as monthly SIP in regular plan fund with 1.8%. expense ratio and 13% yearly return. Gauhar invests same amount in direct plan with 1.2% expense ratio and 13% return. What is their –
- Net returns (actual returns less fund charges) for first year?
- Net returns after 15 years?
A: Corpus of both funds increases by Rs 24,000 each year. At 13% yearly return, both funds generate Rs 27,120 in first year.
- The net returns for first year –
Satish’s net returns will be Rs 26,632 or 10.97% while Gauhar will have Rs 26,795 or 11.65%.
- The returns are calculated on annual compounded basis, net returns after 15 years – Satish will get Rs 9,13,792, but Gauhar will have Rs 9,70,698. Satish will get Rs 56,906 less (6% difference).
There are other factors to consider before making the switch to direct plans.
- You should do necessary research, be tech savvy and handle own investments.
- If you have regular plan, switching to direct plan is useful. You pay lower management fees and get more value.
- While direct plans offer higher returns, corporate or individuals with bigger portfolios benefit more.
- You have other charges including entry and exit loads for switching plans. Some schemes have1% exit load for switches before 12 months, but waive fees regular plans bought directly.
- Switch from existing to direct plan is considered fresh investment and may attract short term capital gains.
- A fresh lock-in period (3-5 years) is applied for switches of such regular plans.
MF Utility is an ideal way to invest in online mutual funds. If you have any other scenario not covered on how to register and invest in mutual funds with MF Utility portal, please let us know. Hope this MF Utility portal guide and review helped. There is no excuse to not invest and have a better retirement. Start Now!!