Mutual fund investment is a commonly available and widely accepted financial strategy tool for investors. It helps them plan their wealth and secure their future. However, investors often spend a lot of time thinking about which path they should take – whether they should invest directly in mutual funds through online platforms or should they contact a mutual fund agent and take advantage of their wisdom. Both these routes are two distinct approaches for the investors in mutual funds and have their own advantages and disadvantages. Now the real question is – are mutual fund agents and online platforms competing with or complementing each other.
The optimal option for a financial investor will be to understand their investment needs, rely on their unique situation and keep their long-term financial objectives in mind. It is crucial to understand which approach best fits the investor’s financial objectives, risk tolerance, and personal preferences. The truth is that the relationship between mutual fund broker and online platforms is either competing or complementing, depending on the context, preference and segment of market. In order to assist the investors in deciding which path is best for the financial journey of an investor, we have examined in detail the main distinctions between investing online and through a mutual fund agent in this blog.
Investing in mutual funds with the help of mutual fund agents
A mutual fund agent, also called as a mutual fund distributor, serves as a bridge or middle man for mutual fund firms and investors. They help clients understand their investment needs and then choose appropriate funds. They also help them manage their portfolios by offering timely guidance and support. It is important to do some market research and ask around the investors to choose the right mutual fund agent. Having the help of a mutual fund distributor has the following advantages:
- Experience and expertise: The distributors are old players of the trade and are well-versed with the nuances of the mutual fund industry. They are able to offer insightful advice to the prospective mutual fund investors.
- Convenience: They save investors a lot of time and effort by taking care of the boring paperwork and administrative duties.
- Access to funds: The distributors have access to a greater variety of funds and spend time comparing them.
However, one needs to keep in mind that there are some challenges associated with using a distributor as well. Some of them are –
- Commission-based fees: When mutual funds are sold by distributors, they charge a nominal fee, which is usually transferred to the investor. As a result, the total cost of the investment rises a little.
- Conflict of interest: Distributors are expected to act in their clients’ best interests. However, it happens at times when their goals are more in line with those of the fund firms they represent.
Investing in Mutual Funds directly through online platforms
Investing directly in a mutual fund means buying units straight from the online portal of the fund house, bypassing the middleman. This strategy has a number of advantages:
- Lesser cost: In comparison to investors using a mutual fund distributor, direct investors usually pay lower costs. The reason is that distributors receive a commission from the sale of funds, which adds to the total sum paid by the investor.
- Increased control: While buying mutual funds through online platforms, investors have total authority over their investments, including the choice of funds, the power to buy mutual funds, and the liberty to keep an eye on their portfolio.
- Flexibility: Direct investors are free to effortlessly move between funds and adjust their holdings as required.
However, there are disadvantages to direct investment on online platforms:
- Lack of knowledge or experience: Investing in mutual funds necessitates market knowledge and acumen, which can be quite difficult for beginners.
- Time-consuming: Direct portfolio management can take a lot of time, particularly for people with hectic work schedules.
- Restricted access: The selections for investments face limited resources and judgments, since certain funds aren’t available for direct purchase.
Factors Mutual Fund agent Online platforms Guidance High as agent gives personalized suggestions Low as decisions are made as per one’s own judgement Price Higher, including fees and commissions Reduced with direct plans, reduced ratio of expenses Interaction Moderate as advice can be taken on the phone or in person High as there are instant transactions with 24/7 access Market perspectives Continuous and expert-driven guidance Real-time and self-researched information Portfolio management Continuous supervision and rebalancing Self-managed Compliance The agent makes sure that rules and regulations are followed Compliance is the responsibility of the mutual fund investor. Authority over investments Moderate, as agent shares it High as investor is totally independent
Selecting the appropriate method
Here are two important points to think about:
Online investing is for the investors who want to have complete control over their finances, prefer reduced prices, and are tech-savvy. For independent investors who want to make decisions quickly and have access to real-time information, online platforms are perfect.
Working with a mutual fund agent is for those investors who value individualised counsel, or need professional supervision for continuous portfolio management, and assistance navigating the intricacies of the market.
When making the choice, an investor should take into account the following factors –
- The investors might be able to handle their investments directly if they have a solid grasp of the mutual funds market.
- As compared to hiring a mutual fund distributor, direct investments through online portal take more effort and time.
- The unique investment needs and objectives of an investor along with their investment acumen determine whether they should choose to invest directly in mutual funds or through a distributor. Direct investment can be a wise choice only if the investor has the time and expertise to handle their finances on their own.
- To ascertain whether an option is more economical, it is important to compare the expenses related to employing a distributor versus making a direct investment.
In conclusion
There are benefits and drawbacks to both direct investment and taking the services of a mutual fund agents. Choosing to invest in mutual funds online or through a mutual fund agent is an important choice investors must make. The decision is based on their experience level, financial goals and personal preferences.