Why should you buy mutual funds, insurance schemes and policies online

Investment decisions are very crucial in our life, as the right kind of investments help lead a financially better life. If we invest wisely, we can earn much better returns. Investment experts say that investors must do some homework before investing in financial instruments. If we have some knowledge of the financial instruments available then we can save a big amount, because if an investor makes the investment through an agent or any intermediary, they charge a certain percentage. The investor can save up to 15 percent in case of insurance products in the first year and up to four percent if it is an equity-linked instrument in the long run (say 10 years). 

When we buy an insurance policy or mutual fund through an agent, we pay various charges such as agent commission, advisory charges, charges for providing services.  Certified Financial Planner Poonam Rungta told Zee Business Online that, "You may end up paying 15 percent more in first premium when you buy an insurance product offline, compared to online buying. If you buy mutual funds offline, the agent commissions are minuscule but there may be other charges too and in the long-run, you may get three-four percent more returns. This is because, you save agent commission, advisory charges, services charges, among other expenses." 

But, when you buy a financial product online you do not get any service that the agent provides. Therefore, the investor has to be more careful and updated about the financial products in their portfolio, she said. If an investor can gain knowledge about the financial products then there are cost advantages on buying these instruments. On the contrary, if you buy such instruments through an agent, they keep you updated about the policies and products.

However, many times agents indulge in misselling financial products, which may not be appropriate for a particular individual, Rungta said. She added that if you buy mutual fund online, in the short run there may not be big gain but, it may give three-four percent additional returns in the long run. Agent commission on insurance products such as ULIPs, life insurance, among other instruments is more, therefore, the investors' expenses go up. 

"There are many direct products which you can buy online either through the company website or aggregators. By doing so, an investor can save a lot on expenses of buy a financial product," said Jitendra Solanki, a Sebi-registered investment advisor. 

The investors must do research on available products on the market. Now, many companies have "direct" plans which are available online only. They can buy products online very easily. An individual investor should read the details about the products before buying them.  However, the investors have to be disciplined when they handle their own portfolio of investments, he said.