Why Direct  |  Commissions  |  Why Jama  |  Using Jama  |  MF Basics

 

Why Direct

What is conflict of Interest?

Most ‘advisors’ (including apps and wbesites) are focused on commissions they make. It is natural that they will ‘push’ products that carry more upfront + trail commissions. If upfront commissions are high, they will encourage investors to sell other funds and get into new funds that give them a cut.

This interest that they have is many times not aligned with your interest of earning steady long term growth. This is called Conflict of Interest.

Why should I buy Direct plans of Mutual Funds?

You save huge commission expenses.

My Distributor or Advisor helps me with everything. Why should I shift?

Most brokers push the products that give them maximum commission. Many do not even disclose the hidden commissions they get from the backdoor.

Jama is paperless and makes shifting so easy. It also helps you save commissions. You get the benefit of regular portfolio monitoring and alerts.

Don’t commission based advisors help investors continue their investments?

It is true that commission based advisors help the investors hold on their investments.

There is also some data that out of every 10 people who invest in direct plan equity funds on their own, 8 redeem within a year. And in bumpy markets (volatile) 60% of them are said to redeem within just 3 months.

But does this justify paying hefty commissions that could eat away upto half of your returns and a big chunk of your overall portfolio to brokers? Definitely not. That is why Jama is here to help you stay the course and monitor your portfolio in good and bad times.

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Zero Commissions (Yearly)

What kinds of fees are loaded?

“a. Upfront commission: anything upto 2%. median is about 1.5%
b. Trail commission: anything upto 3%. median is about 1.5%

<< check link for one of the online providers>>”

Why should I be worried about commissions and expenses?

“If you expect that your investments given a gross return about 10% per annum but the commission expenses are 1.5% then it means that 15% of your earnings are being taken away from you. Your net return is only 8.5%. But wait, what about inflation?

Assuming an inflation of 7%, your gross real return comes down to only 3%. The gross net return after commissions comes down to 1.5%. This means that a hefty 50% of your net returns are being lost to the ‘industry’.

If you take into account taxes this could become worse. A short term capital gain tax of 15% will mean that

What would you call losing a big chunk of your hard earned returns to someone whom you don’t even see? Even if you see that person, what is the assurance that you are getting honest advice and value?

The answer is to keep your fees & expenses to the lowest possible. Jama helps you do exactly that.

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How can i know how much Commission and Expenses i am paying?

“SEBI has mandated all Mutual Funds to disclose the commissions they pay. Simply open your email to locate your Consolidated Account Statement published by NSDL. The subject will contain “”Your NSDL CAS – September””. Go to the Green section called “”Holdings”” and scroll down to the last table whose title contains “”Commission Paid””. You can also search for “”Commission Paid””. This table is quite revealing. It will show how much of your hard earned money has gone to the various intermediaries, distributors and so called “”direct”” platforms.

If you wish to, you can mail a snapshot of this table (don’t worry, we will keep your data strictly confidential). We recommend that you mail a picture after hiding any sensitive information. We will do the analysis and send across the summary.”

Why online brokerage platforms are a RIP OFF?

“Some examples of online brokerage platforms are: Zerodha which lets you buy MF into a demat respository, Tavaga which deals with Exchange Traded Funds.

* You may not get a direct fund. Remember direct funds are 0.8 to 1.5 % chaper than “”regular funds””.
* The brokerage platforms thrive on brokerage. They benefit each time you buy or sell.
* Why should you pay brokerage if they are not giving advice OR have a vested interest in each transaction.
* Overall you may be spending more to get the fund, brokerage and transaction charges for DP, brokerage and trail fund from the fund.

This is like a casino winning each time someone plays. The house always wins.”

Why should I bother about high commissions?

If you expect that your investments given a gross return about 10% per annum but the commission expenses are 1.5% then it means that 15% of your earnings are being taken away from you. Your net return is only 8.5%. But wait, what about inflation?

Assuming an inflation of 7%, your gross real return comes down to only 3%. The gross net return after commissions comes down to 1.5%. This means that a hefty 50% of your net returns are being lost to the ‘industry’.

If you take into account taxes this could become worse. A short term capital gain tax of 15% will mean that

What would you call losing a big chunk of your hard earned returns to someone whom you don’t even see? Even if you see that person, what is the assurance that you are getting honest advice and value?

The answer is to keep your fees & expenses to the lowest possible. Jama helps you do exactly that.

How to find how much commission I am exactly paying?

First, check your Mutual Fund account statement to see if your fund has the word “Direct” in its name or suffix. If not then it is likely you are paying commissions.

To know the exact commission, you can look up the NSDL eCAS statement that you get by email (subject will contain “”Your NSDL CAS – September”. Go to the Green section called “”Holdings”” and scroll down to the last table with title: ”Commission Paid” (or search for “”Commission Paid””). This table is quite revealing. It will show how much of your hard earned money has gone to the various intermediaries, distributors and so called “”direct”” platforms.

If you wish to, you can mail a snapshot of this table (don’t worry, we will keep your data strictly confidential). We recommend that you mail a picture after hiding any sensitive information. We will do the analysis and send across the summary.”

How do brokers make huge hidden commissions?

When someone buys a Mutual Fund’s regular plan through a broker, the broker’s code (called ARN) is attached to your investment account. The meter starts ticking from then. The broker is paid about 1% (or more) in most equity funds. So if you invest 10 lakhs, the broker gets Rs 10,000 as commission. This money is paid by the fund house directly to the broker. As the value of the investment grows, the brokers continues to gets an assured 1%; if the fund grows to 25 lakhs, he gets Rs 25,000.

Broker commissions are of two types:

  • Upfront commission: anything upto 2%. median is about 1.5%
  • Trail commission: anything upto 3%. median is about 1.5%

Isn’t 1% very less. Why are you making a big noise about it?

1% may sound less but it really hurts you both in short term and long term.  If your fund makes 10% then after inflation of 8% you are left with 2%. This means you are giving half of your gains to the broker!  Br  In the long term, say 20 years, paying this every year adds to much more than 20%. That money reinvested could have increased your portfolio by 35%!

Why not through online brokerage like ICICIDirect?

Online brokerages like ICICI Direct, Sharekhan and NJ Invest only sell Regular Plans which as we know carry high commissions. Since they are commission driven you may not be able to trust the funds they recommend to you. Most sales people who have an incentive and target on commission money will push products that suit them, not you.

Isn’t my broker giving me free advice and document pickup?

By now you know that your are paying the broker 1% or more from your money. For advice that may not be in your best interests!

Is this really worth paying? Isn’t document pickup un-necessary, due to paper-less technology and automation?

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Why Jama

What is Jama?

Jama helps you invest in mutual funds paying ZERO commission. Brokers take a hidden cut of 1 to 2.5% every year which reduces your post inflation and post tax returns. The broker makes more money than you.

The funds selected by our SEBI Registered Investment Advisor, are top performers. Unlike other apps who push mediocre funds, because they get high commissions. Since only the customer (you) pays us we have no hidden interests; we work only for you.

Jama comes with a beautiful app (mobile & web) to select the right fund and invest within seconds. The dashboard makes tracking your portfolio super easy!

How is Jama different from brokers?

1. With Jama, you can retain the growth in your investments. Brokers extract their cut (‘pound of flesh’) every year.

2. Jama offers you funds based on clear criteria. Brokers offer funds that earn them higher commission. Even broker’s online apps play this game.

3. Jama comes with technology that is really good! Most brokers don’t have it.

4. Jama provides great services such as reminders and continued advice, using this technology.

What is the cost of subscription for users?

Our STATER plan is FREE. You can build up to a portfolio of Rs 50,000. The first 3 transactions are always free even if you start with higher amounts.

Our PLUS plan that gives you unlimited transaction amounts is is just about one rupee per day. There are is a PREMIUM and a PLATINUM plan as well. Please visit the PLANS page for more details.

How will you give me continued service if you don’t make any commission money?

The industry is moving form a HIDDEN & HIGH cost model to one that is OPEN & LOW cost. We at Jama are part of this major shift.

We are able to offer a low cost as keep our own costs low and use technology extensively to automate everything. Everything from selecting mutual funds to the transaction processing and portfolio monitoring.

The human effort is mostly high end advisory, analysis and model making work undertaken by our SEBI Registered Advisors. And for this personalized and high end work that is valuable to our High Networth clients, we offer Premium & Platinum plans.

This makes us confident that we are here to stay and serve you for lifetime.

What if Jama closes down? Will I still have my money?

We are passionate about using technology to serve our customers and make a big dent in the commission driven Big Finance industry. We are not hobnobbing with Venture Capitalists who can invest & shut down companies if they lose interest or do not get expected returns. We believe that building a strong company is a marathon and not a sprint. So we will be around for a long long time 🙂

And yes, you will always have access to your money since we do not touch or keep it.

Why not other online apps and websites?

There are apps like ETMoney and websites like FundsIndia.com, ICICIDirect.com – but these are all heavily into high commission Regular plan funds. You may be giving away about half (or more) of your hard earned gains* to them.

Why not through Mutual Fund website in direct plans?

One can invest in a MF’s direct plans on the MF’s website. Most people do not have the time and skill to study the thousands of schemes on offer from the 40 plus Mutual Fund Companies.  Also an AMC will only offer its funds whereas our reserach can help you compare the performance of schemes across AMCs and select what works best for you.  Using Jama, you can quickly take advantage of our research team’s recommendations and select funds that meet your requirements.

Jama also offers you the benefit of just one login (also integrated with your Facebook, Google, Linkedin account) instead of creating multiple logins and passwords with several AMCs. Each MF may also ask for a separate KYC which takes time.  We also bring all your holdings across MFs together and show them in nice dashboards.

Jama helps you plan taxes better by optimisng holdings across funds. During tax filing time, you get all your reports in one place.

Why not through website like MyCAMs in commission free direct plans?

While some Registrars (agencies who work with MFs to do their paper work) like CAMS are offering online platforms, they have several limitations.

Firstly they are restricted only to the funds that they service; this effectively reduces your choice by more than 50%. Secondly they cannot offer advice on which funds to invest in.  Jama helps you with recommendations from SEBI Registered Advisor with no conflict of interest. Our selection of schemes is a big value add as you can make better returns in the long run.

Why are your costs so low?

Our costs are competitive because we use technology to automate all operations. Using technology we can serve lakhs of customers at a low unit cost.

With less paper to handle, we need less staff. Plus we don’t need fancy offices. This keeps our costs lean and low.  You as a customer get the full benefit.

We also provide advisory services that are priced higher (but still very competitive compared to what other advisors and “Wealth Managers” charge).
See our pricing plans here.

You claim low charges? What exactly are they?

Yes, we are confident our charges are low. We run a very lean technology operation that automates almost everything. We don’t do fancy offices. We have not taken money from investors who demand high returns (which means high prices for you, the customer).

Please see our Pricing Policy for more details.

Can I shift to any other advisor or platform? Will I still have my money?

This can be done as Jama never has access to your money. When you invest, your money is transferred to the Mutual fund and held in a folio with your name and PAN number. When you withdraw, it comes into your bank account directly. We never touch or hold your money.

If you wish to move to another platform, (we will be sorry to see you go!) you can ask them to initiate the process. If any help is needed, you can contact us at help@jama.co.in.

What is the cost of subscription?

It starts as low as one rupee per day. Other premium plans are also available.

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Using Jama

Can I switch my regular plans to direct plans?

We can definitely help you switch out from high commision regular plans to commission free direct plans. This will require you to first provide a consent letter to the Mutual Fund company that you would like Jama to monitor your investments. Once this letter is processed by the Mutual Fund, we will help you switch out from regular plans to direct plans. In addition we will check if the switch out will involve any load or tax for you. Note that a switch out is treated like a withdrawal by the mutual fund. There is a tax implication for equity funds if this is done before 1 year, and for debt funds before 3 years. We will help you minimise the tax implication.

Do you keep my money?

No. We do not touch your money. Br When you securely send money to invest online, it goes straight from your bank account to the Mutual Fund’s pool account. We do not touch your money when you invest. We do not touch it when you withdraw from your investment account.

Which funds to invest in?

You can use Jama to invest in any one of the recommended funds based on your objective. Our recommendations are based on an algorithm moniotring various parameters of a fund such as past performance, risk profile, consistency, quality of portfolio, size of pool managed etc.

You can completely ignore our list and invest in any other fund that you wish to. The choice is completely yours.

Is a demat account required?

Your mutual fund units are held by the Mutual Fund company with full digital access and at no additional cost. There is no need to hold physical papers for the units as you get continous email statements and SMS alerts. This makes a demat account unnecessary. Why pay for the demat account cost?

How often can I Invest?

With Jama, you get an all-you-can-eat buffet of investment choices with a very low flat subscription fee. Unlike other apps which may be offering you direct plan funds but either have high monthly fees OR costs linked to each transaction.

Once I invest, when do I get to see the units in my account?

Jama helps you track your investment account closely. As soon as you transfer your funds, we provisionally add this to your ‘investment kitty’. Once the mutual fund company processes your investment and allots units, it gets reflected in your investment account along with the published NAV.
The time taken depends on the type of investment and timing of fund transfer.

Am I forced to lock-in my money for any time period?

With Jama we offer only ‘open’ mutual funds. These are funds where you can walk in or walk out any time, except Tax Blaster Funds (or ELSS) which have a three year lockin*. We will of course automatically alert you if the Mutual Fund company charges any ‘load’ for walking out too quickly.

Note: With Tax saving funds, you get a tax benefit but the law requires you to say invested for 3 years.

When should I withdraw from my investment?

If your requirement is to get cash for something immediate, you can withdraw from your SMART-SAVER liquid fund.

Investments in TaxBlaster or WealthBulder planned for  long term goals like retirement or child’s education, should stay put for the long term! Holding for long allows your money enjoy compound growth for longer. You will benefit from industry and economy growth cycles that usually last 5-7 years. Taxes on long term holdings are very low or zero.

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Mutual Fund Basics

What is a Mutual Fund?

A mutual fund is simply a pool of money invested in stocks and/or bonds (ie fixed deposits). Each investor owns units, which represent a share of the pool.

It is easy to invest in mutual funds especially with online platforms like Jama. The minimum investment is quite small and you can withdraw anytime.

Why Mutual Funds?

Most people do not have the time or expertise to manage their own portfolios. Mutual Funds allow your investment to be managed by professionals. Since MFs pool funds they invest across a number of assets so that a loss in any particular investment is minimized by gains in others. They offer liquidity as you can convert your units into cash at any time.

Why not Bank Savings Accounts?

Bank savings accounts are the worst form of savings as you only get 4% or lress from the bank. Current accounts given 0% interest. Liquid funds (a type of debt funds) are the best alternative as you can withdraw your money anytime. Some schemes offer instant redemption and the money reaches your bank account in minutes.*

Why not Fixed Deposits?

Compared to Fixed Deposits, Mutual Fund schemes have given better returns (so far)*. Market FD interest rates and Debt funds fluctuate which means the exact return is not “always fixed”. A big minus for FD is that you have to pay tax every year on the interest gained. With a debt mutual fund, the tax is deferred till you withdraw your money. If you hold the investment for more than 3 years, then the tax paid is even lesser: only 20% of your post inflation gain*.

What is NAV? Is it better for Direct Mutual Funds?

A fund’s NAV is simply the average price of each unit in their investment pool. As the value of the investment goes up, the NAV also goes up. As costs increase, NAV reduces. So, for direct mutual funds NAV will always be higher than their ‘regular’ coutnerpart because broker commission costs are not subtracted. This means more money in your pocket by investing in Direct Mutual Funds.

What is a Direct Mutual Fund?

A direct mutual fund is one that allows you to buy its units without paying any commission. Mutual Funds have two plans – one is direct and the other regular. Regular plans charge commissions that reduce your profit. Direct plans (or Direct Mutual Funds) give you more profit as commissions are absent.

What is an equity mutual fund?

Equity mutual funds invest your money for a share in profits of well performing companies.  They are good long term bets as they beat inflation and offer higher growth.

What is a liquid mutual fund?

Debt funds invest in bonds and other fixed income products that generate interest income.

How does my Mutual Fund investment grow?

Your investments in a mutual fund grows in three ways:
1) Income from dividends on stocks and interest on bonds.
2) If fund holdings increase in price but are not sold, the fund’s unit prices (or NAV – Net Asset Value) rises. You can then sell them for a profit.
3) If the fund does not sell, it has a capital gain, usually distributed back to you.

Why not Exchange Traded Funds (ETFs)?

ETFs are a low cost option as they pool investor money to invest in the market index. However these require a demat account and the brokerage that you pay for every purchase or sell could be significant. The broker encourages you to ‘churn’ your portfolio, ie buy and sell more often so that he makes more brokerage. In addition you may have to pay annual brokerage account charges.

Mutual Funds are actively managed by experienced professionals. In India over 95% of mutual funds have performed better than the index which ETFs mimic. At Jama we are always monitoring funds for the quality of their managers and track record. We believe that for the next several years Mutual Funds are a better investment option than ETFs. Since we do not make any commissions from MFs, we will be happy to advise you on the best possible investment avenues as and when they come up.

Why not Insurance Unit Linked Investment Plans (ULIPs)?

ULIPs are one of the most toxic (poisonous) products in the market. The commissions are huge – several times that of regular plans of mutual funds. Still they are pushed heavily by agents because of the high commissions.  The annual costs of a ULIP are:

  • Between 2 to 6% for premium allocation, and there are fund management charges of upto
  • Policy administration charges upto 2.52%
  • Mortality charges: this is the pure insurance part which can also be obtained by purchasing a plain term insurance plan.
  • 1.35% (only this component compares with direct mutual fund plans; all other costs are profit to the agents and the insurance company).

So you have annual charges of upto 10% + other hidden commissions (could be 20% to 40%) that are taken out in the first 1-2 years of the ULIP.

Why not buy direct company stocks/shares?

Investing directly in stocks is one of the low-cost methods of investing. However like a low-cost knife you can really harm yourself if you do not know how to use it. Most people may not have the time, energy, contacts, knowledge and focus to monitor companies performance and invest in them. Poor investment choices can harm your investment significantly. Mutual funds help you tap the expertise of investment professionals at a low cost.

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