10 Reasons why I haven't yet considered Zerodha Coin for Mutual Fund Investments

Zerodha Coin - Direct MF
1

Recently I switched my shares/ bonds/ govt securities portfolio from HDFC Securities to Zerodha considering better UI of Kite, low expenses and features like Sentinel etc. Though, I have not yet shifted my mutual fund portfolio to Zerodha Coin.

I would want my entire portfolio, everything on a single platform but following are reasons stopping me to consider Zerodha Coin as Mutual Fund investment platform:-

1. The cut-off time to buy/ redeem is strictly 1:30 pm on Zerodha Coin:
Whereas, Mutual Fund cut-off time is otherwise as mentioned below.

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Zerodha Coin forces you to submit your order by 1:30 pm which may get you a different NAV than desired.

2. Unable to switch from one fund to another of the same AMC with same day NAV:
If you want to switch units from fund A to fund B within in the same AMC, you won’t be able to do it with same day NAV, because you have to first redeem the units from fund A which will take T+X days (depending upon the fund) and then you have to buy Fund B. So there would be difference in NAV in those T+X days. This is a demerit of having mutual funds in Demat format.

3. Credit of funds to bank a/c takes longer after redemption:
If order is placed before 1:30 pm, Coin would take T+X days (depending upon the fund) for the redemption amount to be credited to Zerodha trading account. Once the amount is credited to Zerodha trading account, you have to manually withdraw the amount so it is credited to your bank account. This takes upto 24 hours from the fund withdrawal request. So in total T+X days + upto 24 hours.

Tip for Coin product development team: Why not add a tick mark while redeeming so the user can select whether to withdraw the amount to bank a/c also so it saves them from manually doing it later.

4. No direct bank a/c to SIP. No STP:
SIPs on Coin are not usual SIP directly from bank a/c. You have to manually transfer funds to Zerodha trading a/c on or a day before of SIP or you can keep funds in the Zerodha trading a/c which means you lose on bank interest on the amount. Also, there is no STP option available on Coin.

5. Unable to avail benefits of Insta Redeem Liquid Funds:
Insta Redeem Liquid funds e.g. Reliance Liquid Growth, Axis Liquid Growth etc. funds allow you to redeem upto Rs 50,000 or 90% of your invested amount within as early as 30 minutes even at midnight or weekends. Though these funds are available on Coin, you won’t be able to redeem them instantly. It would take T+1 day for redemption (if order is placed before 1:30 pm).

6. Detailed Portfolio information not available:
On Zerodha Coin, it does not show detailed portfolio information and analysis e.g. percentage allocation amongst Large, Small, Mid etc, Percentage allocation between Debt and Equity, Total expense ratio and returns of the entire portfolio, sub-divided into debt portion and equity portion, Filter portfolio by fund type, AMC etc to analyse the performance on various parameters.

7. Doesn’t show units without any exit load, and LTCG tax-free units available for redemption/ switch:
Zerodha Coin does not show you the units available in a fund which won’t incur in any exit load upon redemption. Also, it does not tell you units available in a fund which have completed more than 1 year or more (along with their respective returns) which can be redeemed, switched, rebalanced without any LTCG and so the returns become tax-free. This information is quite handy while rebalancing your portfolio.

8. Can’t invest in NFO:
You can’t invest in New Fund Offering of a mutual fund scheme on Zerodha Coin.

9. Can’t pledge MF for margin or LAS (Loan Against Securities):
You can’t pledge mutual funds to create margin which can be used for equity delivery. Also you can’t avail loan against the mutual funds.

10. No information provided about the market or changes in the fund:
Coin does not provide you any information about the dynamics of the market. What are the indices changes weekly, resignation/ appointment of a fund manager, change in TER of a fund .etc. details.

Though Coin has recently waived off the DP charges for redemption, and earlier the Rs 50 monthly subscription charges were waived off for investments exceeding Rs 25,000, I believe the above mentioned pointers are important factors for an investor to consider and thus requires attention of @nithin, @faisr, and team Coin.

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3

Thanks for shifting from HDFC :slight_smile: .

We are about to launch emandates for direct bank a/c transfer and also working on launching STP. With our SIP, you can start/stop anytime you want, which is much better than traditional where it takes a lot of time, especially when AMCs are having issues and clients want to switch/stop. Detailed portfolio information is coming on Console, it will not only show MF bit, but also across equity and MF (stock holding concentration, etc). LTCG tax free units will show up in the holding section of Console. LAS is coming up soon. Point 10, we will work on it.

@faisr point 7/8?

The rest, we can’t really offer because we sell direct mutual funds in demat mode. By doing in demat mode, we h have been able to power almost Rs 5000 crore of investments with just a 4 member team. If you had to compare this to competitors who are doing in non-demat, they have 10 times more people on the team and have done maybe just 1/10th of the business. Not just that, in non-demat, all other operating costs go up significantly.

Why should you as a client be bothered about this? Currently none of the direct mutual fund platforms are generating any revenues, but all of them would be burning upwards of Rs 10 crore/year (including marketing and advertising) to run the business. The only way this will work is from VC funding and/or if they figure a way to monetize. What happens if either doesn’t happen, your investments are for long term and not short. Yes, your investment is safe even if platform decides to shut shop. But you’d have to worry about moving out all of the details/holdings/emandate to another platform. Not just for us, even the AMCs themselves save a lot on supporting MF in demat, as the RTA costs are lesser. If I’d have to fathom a guess, eventually everyone will be forced to sell MF in demat mode because of the operational leverage and some of the limitation today will get solved for.

So I know you as a client want to be penny wise, and go to a direct MF platform who is not charging anything and gives you everything. But like I mentioned, it isn’t really sustainable. Maybe one in many will eventually survive if they don’t charge anything, and once the consolidation happens everyone would get back to charging what should ideally be charged for such a platform (not zero :slight_smile: ). Btw even if you don’t decide to switch, maybe you should donate some money to the platform you use, just to help them survive as you’d want them to sustain in the long run. Most of India wanting everything for free (VC money is not going to keep coming in forever) is not good for the business/country in the long run.

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5

I understand some of the limitations are by design of mutual funds in Demat format. I also appreciate your 4 member team achieving this feat. But an end user only cares about the output and not the input. Please don’t take it otherwise but this is a fact. Having said that, there is always room for improvisation.

E.g. for #3 I have suggested a checkbox 'Withdraw to Bank A/c" on the redemption screen. Here is a mock for you to understand it better. This will save users to manually withdraw funds after redemption by automatically triggering fund withdrawal to bank a/c as funds reach the trading a/c after redemption.

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Regarding #7, every fund has a different exit load period. This feature would tell for every fund in the portfolio, how many units are redeemable without exit load, the amount invested for those units as per past NAV, Redemption value as per the current NAV, and the tax applicable and profit and loss if the redemption is carried out.

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Regarding #3, #5 and #9, can’t they be clubbed together for a bigger picture? Imagine, I have pledge my MFs and when I redeem other funds or an Insta Redeem Liquid fund (which are not pledged), I get money instantly without waiting for T+X days as I get the fund as loan against security for those pledged MFs, and when redemption amount is credited to my trading account, this loan is paid back. So necessarily, I pay interest for those T+X days only for instant redemption of amount. Think about it!

Cheap is not what a user looks for. What he looks for is value for money. And I personally do not believe in free lunches either. In fact, if you remember, in our one-to-one private messages I have shared my views with you that pricing is what Zerodha needs to work upon when it was charging Rs 50/ month subscription charges and even then I didn’t mean to make it free. Regarding the failure of other free platforms, so only time will tell. But AMCs also have joined hands to bring MF Utility platform which again is free.

If RTA costs are lesser, then keeping in Demat should reward the users by passing the benefits. Unless these changes happen and the underlying drawbacks are resolved, I don’t see a real reason for keeping MF in Demat unless when regulators force us to have MF in Demat format.

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I see their platform is great. I guess your points are valid if you would like to transfer funds in and out within minutes, seems more like intraday trades with mutual funds.

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7

A simple feature to the client might require complex implementation at the backend. But that is what we are constantly working at, pick up the most important that affects most people and then keeping going down that list. So everything will eventually get done.

About MFU, AMCs are paying for it from their pockets. They also end up having to support the MFU client and with the latest changes, they can’t bundle that support charge in direct MF anymore. If you speak to senior level at AMCs you will realize that with latest regulation on how expense ratio can be charged on direct, they don’t like direct investments which comes through MFU or their platforms directly as the support cost has to be born by them which otherwise platforms like us will take care of.

MF in demat, just a matter of time, even if MFs don’t, markets will eventually drift towards ETF like in every developed market which has to be in demat. Btw RTA’s charge AMCs in basis points for managing the MF transactions. That benefit will eventually move to clients if enough people move to demat.

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8

I understand :slight_smile:
Apart from the features/ improvisations suggested above, please also include this - for tax loss harvesting in the console, consider the mutual fund portfolio as well which would help an investor to rebalance and save tax overall as required.

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Mutual Fund Utilities (MFU) is he best platform for investments in Mutual Funds.

Don’t bother with any of these platforms (Paytm, ZeroDha etc) which have one limitation or another.

They may be free/low cost now, but they will eventually introduce charges since they have to make money for their investors

10

@faisr any idea by when the quoted features will be available? Some of features have been in discussion for over 2 years now. Newly released feature - Detailed portfolio information for MF in the console is not upto mark. Also, any thoughts on #7 and #8?

Apart from the above mentioned pointers, another hurdle for MF in Demat format is hassle and expenses incurred in dematerialisation process, which is even more tedious for an ELSS fund. This makes it reason #11.

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11

@nithin @faisr,
After writing many disadvantages of having MF in Coin, allow me to share a thought that might be an advantage of having MF in Coin:-

Currently, STP/ Switch is possible between funds of the same AMC only. Now imagine Coin brings in Switch and STP feature that would allow users to make inter-AMC transactions. Underneath, it is redeem units from fund in AMC A and buy units in fund in AMC B (once redeemtion amount is credited to trading a/c). The user gets the convenience of one click switch/ STP between AMCs. Think about it!

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12

Yep, that is how it is being built.

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13

When you visit a mutual fund detail page on Coin, it lets you calculate “How much would you have made with SIP?” by selecting SIP start date and end date.

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It currently shows the profit/ loss in Absolute returns, but when SIP is concerned, XIRR is a better measure than absolute returns. Can we show the XIRR percentage here for better decision making?

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Another request to @faisr @nithin and team Coin - Same Day NAV Update

Mutual Funds update daily NAV between 8-10 pm. But Coin shows the NAV changes on the next day only. Can we show the latest NAV as soon as it is published by the fund houses? So our portfolio value is accurate and up to date.

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15

For (7), will discuss internally and figure out a solution. The problem is that unlike most equity funds where the exit load is a flat 1%, there are many schemes which have different slabs for exit load.

(8), We will be launching a new version of coin soon and NFO will be a part of it.

Wrt to the hassles in dematerialization of ELSS funds, we would love to make it easier for our clients but unfortunately the process is defined by the respective RTAs (CAMS,KARVY). Hopefully, once more distributors sought the demat route for investments this should be sorted in the future.

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Our data vendor shares the NAVs of some schemes on the same day (which would be updated before 12 am) and for the remaining schemes we receive the data next day in the morning. These will be updated by 10 am.

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Isn’t SIP’s supposed to be a passive investment, where you invest during your working years and cash it when you retire ? Why would someone want to keep tracking it every day at 8pm, unless they don’t really understand the real purpose of saving in Mutual Funds?

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Have I mentioned tracking everyday at 8pm? All I requested for is NAV to be updated as soon as fund houses publish it without any latency in receiving data. That’s it!

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Thanks @faisr for replying and actively participating in the forum after long.

I understand #7 is a bit challenging because of different funds having different exit loads and lock-in period. But I believe the Coin tech team can find a simple solution for this complex problem. :slight_smile:

Would like to your thoughts on showing XIRR value for “what if” for past SIP:-

and this, one click withdraw to bank a/c while redeeming:-

Also, the with LAS in the backend, instant redemption, instead of waiting for T+X days) would be a good feature for investors who need funds instantly instead of waiting for T+X days, and it’s a win-win for Zerodha also to generate revenue by providing the redemption value as loan. Once MF credits the redemption value to Zerodha trading account, the loan is paid back (so the loan is a secure loan) and in the monthly statement, LAS loan interest amount for those T+X days is charged to the user. Sounds a bit complicated to implement but again a great feature from user’s point of view. What do you think?

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All NAVs are updated between 12-1 PM. Moreover for investors it makes very little difference. There’s plenty of research out there to prove that they are better off not checking the daily NAVs. :slight_smile:

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I just mentioned delayed NAV updation on Coin. Nothing less. Nothing more. Let’s move on from this.

Would like to know your thoughts on this

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Yes mutual fund problem is there with Zerodha, apart from that all other demat services are good.

anyway i consider My Cams and Karvy app for mutual fund, Because from any app or service provider you invest the money in MF, you will find all of them in these two app

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