Zerodha Coin is yet another initiative by the leading discount broker of India Zerodha known for new offerings. They have been quite successful in disrupting the brokerage industry with their state of the art tech platforms and rock bottom price structure.
Now with “Coin”, industry veterans are believing that they are going to disrupt the Mutual fund industry as well.
Zerodha already had a mutual fund platform where it allowed regular investments. But the recent decision by SEBI to allow the direct mutual investment has given Zerodha a wonderful opportunity to leverage its technical know how.
What is Zerodha Coin?
Basically one can invest in mutual funds in two ways.
- Through the Mutual Fund Distributors
- Directly from Mutual Fund houses
Both the ways have their own pros and cons. Lets review them briefly which will help in understanding the structure of Zerodha Coin
1)Purchase of Mutual Funds through Distributors(Regular funds):
Mutual fund distributors are known to general public by various names such as agents, adviser etc. But at the end of the day they help us only because they earn commission on the investment that we make.
The mutual fund houses pay commission to them for bringing the investors and the quantum of the commission paid to them varies from one fund house to another. So here it comes the conflict of interest. Usually the agents suggest the funds which are more beneficial to them rather than the investors!
Do you know how much these agents are paid?. They are paid upto 1.5% of your each investment (one time). Not only that, fund houses pay them upto 1.5% of the cumulative investment of yours every year! (this is called trail commission)
So if you invest Rs 1 lakh lump sum at the beginning , the agents pocket Rs 1500 initially. And assume that you continue to invest through SIP and your portfolio bulges to Rs 1 Cr, then the agents are paid Rs 1.5 Lakhs every year as long as you keep invested!
But all these amount is paid from your investment and you will never be able to understand it since the fund’s NAV doesn’t reflect the actual story.
Now suppose you have kept 1Cr in mutual fund and lets hypothetically assume the the fund doesn’t increase in value even after 30 years. But the agent will get Rs 1.5Lak x 30 = 45 Lakh in commission deducted from you corpus.
That a big outflow, isn’t it? Now how about about bypassing the agent?
Yes, some genuine agents provide good advice in selecting the funds based on your financial goals but nowadays lot of information is available openly and the amount you pay in long term is exorbitant compared to the service they provide.
2) Directly from Mutual fund houses:
If you think you can invest in mutual funds yourself and save considerably on agent’s commission, then all you have to do is to contact the fund house directly and start investing.
You may have to fill some forms initially to get started. But the real problem starts when you need to track all your involvements if you invest in multiple funds. That is the big pain in the neck if you choose to invest in multiple funds, and that is the case usually as investors put their money in various types of funds.
There are few other platforms in the industry for example “Mutual Fund Utilities” (MFU). But interface provided by these houses are very primitive. The interface does not even show us the value that we actually invested. All it shows is the current value of our holdings.
This is where Zerodha Coin intends to help retail investors. If one has demat account with them, all your investments, mutual fund holdings, trade reports etc can be obtained by just click of the button.
Basically they are providing a outstanding interface which was lacking in other platforms. One can even compare the performance of funds before choosing to invest in that.
Charges for Zerodha Coin:
Zerodha Coin charge structure is pretty easy to understand. They charge Rs50 per month irrespective of the value of your holdings, that’s it.
And it is commendable that they have waved off these charges to enable small investors to take advantage of the services. For the investment value upto Rs25,000, no subscription fee is levied.
That means, if you do a SIP of Rs1,000, you will not be charged any subscription fees for 25 months. (But keep in mind that, here we are assuming that your investment value will not increase more that Rs25000 due to market appreciation. Suppose if the cumulative value shoots above Rs25,000 by say 23rd month, Rs50 will be charged from 24th month)
Disadvantages of Zerodha Coin:
- Lets take above example of Rs 1,000 SIP, on 25th month you will be charged Rs50 ( Rs600 yearly). So after one year, your investment would become Rs 37,000. Now this Rs6oo on Rs37,000 is more than 1.5%. It is almost equal to what agents used to charge us. But once your investment increases, the percentage value goes down. Hence Coin is more suitable investors with relatively larger holdings.
- Some people still prefer to use regular funds due to various reasons (For them Zerodha has maintained their older platform mf.zerodha.com)
- As the platform is relatively new, there is not much reviews available to evaluate customer feedback
Advantages of Zerodha Coin:
- Reliable name to bank upon. There were many platforms existed on this concept but could not survive. But with big name such as Zerodha backing it, coin can gain popularity in coming days.
- Zerodha is known for its technical capabilities. They have demonstrated it in previous past through various outstanding trading platforms, hence Coin promises to come with lot of features
- Coin enables direct mutual funds in demat form, with convenience of one portfolio across equity, MF, currency, ETF etc.
- Availability of NAV tracking orders. Similar to stocks, place orders to purchase or redeem funds based on NAV.
How to get started with Zerodha Coin:
Zerodha had brought the already established stock brokers to their knees through the predatory pricing and excellent customer service. Agree it or not, all the cost benefits are passed to the retail traders and they are saving tons of money on brokerage.
Now through coin, one can significantly increase their MF assets in long term even though it looks insignificant in short term. Going forward Zerodha Coin may become best online platform in India to invest in mutual funds. If your assets are more than Rs 35,000 to Rs 40,000, then think no other platform than Zerodha coin.
For that one need to open account with Zerodha first. You can open the account instantly if you have Aadhar card. If you still have any queries regarding Coin which is not answered in this review, submit your details by clicking the button below. One of their representative shall call back and explain in detail.