PayTM moment for MF – What it means for investor and the industry?

PayTM Money launched its much-awaited mobile platform for MF investors today, and let me tell you, it is one of the best apps I have ever used to transact MFs.

Many are calling it the JIO moment, but for me its The whatsapp moment!  JIO was about pricing disruption, while whatsapp was both, pricing and user-interface. PayTM money is akin to whatsapp moment for the MF industry – It will change how Indians buy MF and also how much they pay for it.

PayTM moment – what it means to investor and the Industry?

About the Application:

Hits:

  • As expected from PayTM it is smooth and easy.
  • Fund pages are informative and allow basic analysis of the funds.
  • Simple, intuitive and easy to understand filters are provided to choose funds. In particular – Investment Ideas filter suggest you simple alternatives to FDs and savings account.
  • And all this is FREE – at least for now.

Misses:

  • One cannot view and migrate his existing MF portfolio to the app.
  • Ratings from all 3 agencies are displayed which can confuse investors. As in many cases the same fund is rated 5star, 3star and 2star by different agencies. They should go for one agency or have own mechanism to rate them.

(Its very early to cover all hits and misses and these are only what I gathered as 1st timer) 

What it means to investor?

Investing in Mutual fund involves 2 important steps – where to invest and how to invest. The app fulfils the how part of it, but not where to invest. It provides a cost-efficient way to invest in mutual funds and one should use it to his benefit. Investing in direct options will surely add more to your returns in the long run. However, while investors might get impulsive and start investing in MF through this ultra-simple platform, they must keep in mind the importance of knowing where to invest. Humans suffer from cognitive biases and get attracted to high returns, while completely forgetting about the risks involved. If you go to the app, the first thing it shows you is the list of current best performing funds, and that surely is not the only reason to buy these funds.

In nut shell use this app for transactional ease and cost efficiency, but keep an eye on where to invest and do your homework or seek professional advice. Mutual funds are not as easy as buying a mobile phone, but as complex as buying an antibiotic medicine, for which you need a prescription as it comes with side effects.

What it means for the industry?

If this becomes a whatsapp moment for the MF industry it surely can add huge number of new investors initially, but how many continue, and the further growth will be dictated by their experience. As they say, first impression lasts. On the other hand, while distribution may get disrupted and transactional oriented distribution setup may see the sun setting, advice only model will see the sunrise. PayTM moment can give a golden chance for advisory community to focus more on advice and less on transactions. PayTM moment will bring along a sea of new investors into mutual funds who will need advice.

As Morgan Housel quoted in his recent tweet..

In investing,

10% don’t need investment help, they intuitively get it and will be fine.

10% people can’t be helped. They are compulsive gamblers and will always be in bad shape no matter what you tell them.

80% of people want/need good advice.

So all in all the PayTM moment can become a whatsapp moment and bring about the change that is required for the next leg of growth in MF industry, and everyone will eventually benefit from this moment.

Happy Investing!

 

 

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