Stock brokers have a solution to investors’ long-standing demand for a facility allowing them to buy exchange-traded funds through a systematic investment plan (SIP) at fixed intervals.
Mutual funds provide SIP for most equity schemes, but have been unable to offer the option for ETFs so far because the latter is traded on the stock exchanges like shares, unlike their other schemes that are usually bought or sold through application forms. Now, clients of some brokers can buy ETFs through a facility similar to SIPs.
ETFs, which reflect the returns of an index such as the Sensex or Nifty or a commodity like gold, are
popular among a section of investors because they can capture the value of the security any time during
trading hours.
So far, only Kotak Securities and Sharekhan were offering the SIP-like facility for ETFs to clients on their online platforms. Some smaller brokerages manually remind clients on a fixed date for the purchases.
The online system of brokers is a little different from the electronic SIP system of mutual funds, where investors give mutual fund a bank mandate to deduct the instalment for investment as decided in the application form.
In the facility provided by brokerages, investors set their online system in a way where it mechanically buys a certain quantity of ETFs during specified intervals, but the difference is in the trade settlement. Here, the instalment is not directly debited from the client’s bank account, but transfer the money to the broker after every purchase, which could be weekly, monthly or quarterly.
Kotak, which calls its SIP-like system AutoInvest, requires clients to transfer a fixed amount to the broker’s account every month to avail this facility.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Exchange-Traded-funds-tie-up-with-brokers-to-offer-SIP/articleshow/5772120.cms
Mutual funds provide SIP for most equity schemes, but have been unable to offer the option for ETFs so far because the latter is traded on the stock exchanges like shares, unlike their other schemes that are usually bought or sold through application forms. Now, clients of some brokers can buy ETFs through a facility similar to SIPs.
ETFs, which reflect the returns of an index such as the Sensex or Nifty or a commodity like gold, are
popular among a section of investors because they can capture the value of the security any time during
trading hours.
So far, only Kotak Securities and Sharekhan were offering the SIP-like facility for ETFs to clients on their online platforms. Some smaller brokerages manually remind clients on a fixed date for the purchases.
The online system of brokers is a little different from the electronic SIP system of mutual funds, where investors give mutual fund a bank mandate to deduct the instalment for investment as decided in the application form.
In the facility provided by brokerages, investors set their online system in a way where it mechanically buys a certain quantity of ETFs during specified intervals, but the difference is in the trade settlement. Here, the instalment is not directly debited from the client’s bank account, but transfer the money to the broker after every purchase, which could be weekly, monthly or quarterly.
Kotak, which calls its SIP-like system AutoInvest, requires clients to transfer a fixed amount to the broker’s account every month to avail this facility.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Exchange-Traded-funds-tie-up-with-brokers-to-offer-SIP/articleshow/5772120.cms
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