SEBI has announced that now MFs can be traded through stock exchanges. You would be able to buy them through stock brokers.
So far, you were able to but mutual funds (MFs) either through an MF agent, or directly from the fund house.
Now, the Securities and Exchange Board of India (SEBI) has announced that you would be able to buy MFs even from registered stock brokers.
The stock brokers intending to sell MFs would have to clear the certification exam mandated by AMFI (Association of Mutual Fund Investors).
MFs would trade on stock exchanges
MFs would now trade on the stock exchanges. They would not be listed like stocks – that is, their price would not change during the day. They would merely be listed on the stock exchanges – this means that stock brokers can deal in them.
This opens up one more distribution channel for MFs – thus, you would have one more avenue to buy MFs.
Close ended MFs
Don’t confuse this with close ended MF schemes – they are already listed on stock exchanges.
Now, even open ended MF schemes would trade on the exchanges.
(To know more about open ended and close ended MFs, please read “Close Ended vs Open Ended Mutual Funds (MFs)“)
How does this help you?
Stock markets have a very wide reach – there are more than 2,00,000 stock exchange terminals in more than 1,500 towns and cities.
Since MFs would be available through all these terminals, they would reach a much wider population.
(Should you be buying stocks directly, or invest through MFs? Read “Direct investment in Stocks versus Mutual Funds (MFs)“)
Also, if you want to buy MFs, this would ensure that there is someone close by selling MFs!
Dematerialization of MF Units
SEBI has also called for dematerialization (demat) of MF units. The MF units traded through stock exchanges would need to be in demat form.
(Even today, you have an option of holding your MF units in demat form)
This means that you would be able to purchase and sell MF units only if you have a demat account.
The announcement by SEBI is quite recent, so there is not enough clarity on the charges involved.
However, it is expected that the brokers would levy a small fee on the transactions done through them. This could be the same as the transaction charge levied on share transactions – 0.25% to 0.50% of the transaction value for both buying and selling.
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