Zerodha Coin is a recent initiative from Zerodha, a leading discount broker in India, for direct mutual fund investments through the platform. This has been introduced post a recent circular from SEBI that allows retail investors to invest in mutual funds in demat form (via a demat account) through exchanges.
Zerodha Coin is one such direct mutual funds investment platform that allows you to invest in mutual funds directly.
Conventionally, if you have been investing in mutual funds, there have been two ways to do it:
Through Local Distributors:
Distributors are third parties that help you to invest in specific mutual funds, do your paperwork and place your investments against those funds. They certainly make the overall process of investment smooth for you, but there is a negative side to it.
These mutual fund distributors earn upfront 1.5% commission depending on your investment value and then consistently make another 1.5% trail commission every year as long as you stay invested with those mutual funds. These commissions eat out your investments, thus, cutting down on your returns.
For instance, if you invest ₹5000 per month for 5 years (assuming your investments are making 15% returns per year), then these distributors will take away more than ₹16,500 as commissions from your investments. These commissions, obviously, increase cumulatively with your investment period. Most of the investors don’t realize this concern and end up paying these distributors every investment year.
And to remind you, there are no services that are provided by these distributors. The only help, one receives is that initial help in buying mutual funds and that’s it!
Directly from the Fund House
You can also invest in mutual funds directly through the fund house. For instance, if you want to invest in Kotak Securities Focus fund and Reliance Money fund, then you would be required to either browse mutual fund house’s website or visit their offline branch of office, fill up few forms and invest into the fund.
The concern using this particular method is that you would be required to fill out all those forms individually of the funds you are interested in. At the same time, you would be needed to track these funds, get the statements on your own. Thus, a lot of involvement from your end would be required.
This is where Zerodha Coin comes into the picture. Zerodha Coin allows you to invest directly in mutual funds in DEMAT form like you invest in Equity, Currency or other segments. With Zerodha coin, you can directly buy mutual funds online through Zeordha portal. The best part of Zerodha coin is that it does not charge you any brokerage whatsoever.
Zerodha Coin also prescribes you few high performing mutual funds through the portal with return percentages and investment period.
Zerodha Coin Charges
If you subscribe to Zerodha Coin, you do not need to pay any commission based on the monetary value of mutual fund investment, like what happens in the case of distributors. You need to pay ₹50 per month irrespective of the value of your investment. So, even if you are investing ₹10,000 or ₹50,000 a month or ₹20 Lakhs a year, you would be required to pay ₹50 per month or ₹600 per year for all your mutual fund investments.
The best part is, the first investments of ₹25,000 require no subscription and is free in nature. However, once your cumulative investment (interest earned included) increases more than ₹25,000 – the subscription charge of ₹50 starts applying.
In other words, if you start a SIP of ₹5,000 a month – then your first 5 months will have no charge. From 6th month onwards, you will be charged ₹50 per month until the time you run your investments.
From August 2018, Zerodha has made investments through Zerodha Coin completely free. The broker has left even the ₹50 per month charge (mentioned above) after getting quite a reasonable competition from players such as Paytm.
However, this could be a temporary offer and the charges can go back to the ones mentioned above whenever the broker feels like. Nonetheless, feel free to use the app for free till it is!
The Darker Side of Zerodha coin
If your SIP value is less, let’s say ₹2,000 a month. For the first year, you will not be charged anything. But from 2nd year, you will be charged ₹50 on your ₹2,000 investments or 2.5% of your investment, which is pretty high honestly (almost close to distributor model).
Thus, Zerodha coin is suitable for investors who are looking to invest relatively higher fund values.