Paytm to Sell Direct Mutual Funds Soon; Here All You Need to Know About Charges, Return

Once "Paytm Money" app goes live 300 million users will be able to buy mutual funds with the click of a button.

You will be able to buy mutual funds from Paytm soon, as the mobile payments company plans to make the platform live within the next two weeks. Once “Paytm Money” app goes live, 300 million users will be able to buy mutual funds with the click of a button. Moreover, considering nearly half of Paytm wallet’s transactions are from tier 2 and tier 3 cities, it is expected that it will increase the penetration of mutual funds to the remotest part of the country. However, considering mutual funds invest in stock and debt markets it is to be seen will people be able to make informed decisions while buying mutual funds through Paytm.

Vijay Shekhar Sharma, the founder of Paytm, on Thursday said, at the sidelines of the Mutual Fund Summit 2018, “Paytm Money has set a target of adding 20 million customers in 1,000 days.” At the industry level there are, currently, total 74 million folios. He added that Paytm Money app has crossed 750,000 users.

Charges

Paytm Money will be offering direct plans that are low-cost compared to plans bought from distributors. Direct plans are cheaper because they do not charge you for distribution expenses. Paytm Money is expected to charge you a nominal fee for buying funds.

Given there is no distribution cost, direct plans of mutual funds offer comparatively higher returns than regular plans.  The back of the envelope calculation shows that the difference in returns between direct plans of mutual funds and regular plans can be as high as Rs 68 lakh. Consider this: For a Systematic Investment Plan (SIP) of Rs 10,000 for 25 years, at an annualized return of 15 per cent, one can save Rs 3.97 crore through direct plans and Rs 3.29 crore through regular plans. Under Systematic Investment Plans (SIP), one invests a fixed amount at regular intervals to average out cost in the long run.

How much can you invest?

Considering KYC needs are already fulfilled for Paytm customers, there will be no limit on the amount of mutual fund you can buy from the platform.

Tie-ups

The app has tied-up with most of the mutual fund companies, handling almost 90 per cent of the asset under management of the industry.

Shekhar, said, he is open to work with the distributor community as well, including independent financial advisors (IFAs). “Paytm Money will largely be aimed at a new, young generation of investors that seek a simple platform for investing their savings.”

He said, “We want the transactions to happen instantaneously. We want to create a platform where folios open faster and redemptions can be settled immediately. Why can’t we look at possibilities such as borrowing from banks over short-term to settle redemptions immediately?”

Paytm Money is a registered investment adviser (RIA) with the Securities and Exchange Board of India.