How To Invest in Direct Mutual Funds in 2023

Want to invest in direct plan?

Friends, if like me you are also thinking of investing in Direct mutual funds, today I am going to share a study done for investing in mutual funds, which will definitely benefit you. So you will get some great goals out of that investment.

So are you excited to explore the world of direct plan investing? Mutual funds, in my opinion, are one of the best investment vehicles in the securities market, allowing investors to earn inflation-indexed returns over time.

In this comprehensive guide, we are going to provide detailed information about what mutual funds are, who they are, what plans they have, how to invest in them online and offline, the process and benefits of investing in direct plans of mutual funds, how much it will cost while investing.

In this article, learn how you can boost your returns by investing in a direct plan without an intermediary, learn the steps to get started, and gain insights to manage your investments effectively.

Whether you are a seasoned investor or just starting your financial journey, this article equips you with the knowledge you need to make informed decisions and reap the benefits of direct plan investing. Explore the world of live plans today and take control of your financial future.

What is a Direct Mutual Fund? | WHAT IS A DIRECT PLAN?

Regular Plan and Direct Plan | Direct vs Regular Mutual Funds

If you want to invest in mutual funds, then first know that direct and regular are different investment options for the same mutual fund. Buying a direct plan is like buying the item directly from the manufacturer. No agent is involved in this.

If you invest in a mutual fund through a distributor or agent, it is a regular fund.

Direct Plans are less expensive for the investor. It has a lower expense ratio than the Regular Plan due to the absence of a distributor or agent. The money saved on commissions or distribution expenses is added back to your profits.

The reduced expense ratio of the Direct plan contributes to greater investment returns over time. Compounding explains why Direct Plan returns are more valuable over time compared to Regular Plan returns.

This is also why, despite having the same portfolio and fund manager, Direct plans and Regular plans have distinct NAVs (Net Asset Values). However, observe that the difference between the NAVs is minimal.

Switching

You can transfer an existing investment in a regular plan to the direct plan of the same scheme to convert to a direct plan. This involves redemption from one plan and investment into another plan, which may have tax consequences.

Who should Opt for a Direct plan? | Why Direct Mutual Funds are Better?

If you are able of conducting your own research, comparing mutual funds, and choosing one that aligns with your investment objectives, you should select a Direct plan.

However, if you are a beginner and unsure of which plan to choose, you should undoubtedly select the Regular plan.

You could also choose the Direct plan on the various brokers platform like Upstox. They have already conducted exhaustive research and compiled a list of the top-rated funds in each category.

More on that shortly! However, let’s now study how you can directly invest in mutual funds in India.

Read Also – Looking for Hang Seng Moneycontrol Index Today – Stock Price, Real Time Quote and News

How To Invest In Direct Mutual Funds | HOW TO INVEST IN A DIRECT PLAN?

Investing in Mutual Fund-Direct Plans is essentially possible through two modes: offline and online.

The initial stage is to select the Mutual Fund in which you wish to invest. This requires knowledge of the type of Mutual Fund and the Asset Management Company (AMC) to which the fund pertains.

It is also important to consider the quantity you want to invest in the scheme based on your objectives, as well as whether you want to use a Systematic Investment Plan or make flat sum deposits.

If you are want to learn how to invest in mutual funds without a broker, you are in the right place. Both processes require you to accomplish a number of necessary stages.

How to Invest in Direct Mutual Funds Online?

If you don’t want to physicals visits and hassle free process, you can purchase direct mutual funds online. It is without question more practical.

As a first-time investor in a mutual fund, you must also complete the KYC requirements. This is a one-time exercise; therefore, you can use this information to invest in Direct Mutual Fund Plans across all platforms.

Your PAN is essential, as all MF companies verify that your KYC information is linked to your PAN.

Firstly do your research and choose a fund. Once you have selected your mutual fund scheme, there are two ways to invest in it. 

• Through an asset management company, aka a fund house
• Through an RTA (mutual fund registrar and transfer agents) or other mutual fund utility channels

Each of the below methods explains how to buy direct mutual funds online in India.

Investment In Direct Mutual Fund Through the Asset Management Company Website

Similar to the offline method, you must first select a Mutual Fund Scheme before proceeding to its official website. Then, proceed by following the instructions outlined below.

• Open an Account with the AMC

You must open an account with the Mutual Fund House or AMC before investing. Details you require This information is similar to what you would find on an application form. But the process of registering in might be different from one AMC to the next.

• Select the Scheme

It is the most important stage in direct investment. Under the option of “Plan Type”, choose “Direct”. Then, select the scheme you wish to invest in and the option under which you wish to invest.

Here, you have two options – Dividend and Growth. Consider which would suit your investment objective and choose accordingly.

• Choose Investment Details

1. Select other important investment details, which include – 
2. Systematic Investment Plan or Lump-sum
3. Demat or No Demat
4. Whether a Registered Investment Adviser is helping you out or not – RIA Code 
5. Mode of payment
6. Confirm the details with bank Name, Bank Account Number, IFSC, and Account Type.

This is where you choose the plan from the list you made in the last step. Make sure it fits your risk tolerance, financial goals, available funds, cost ratio, taxes, and other factors. So, take your time to choose the right mutual fund plans for you.

• Verification

Next, you have to make sure that the information you put in the previous step is correct. Make sure to check that everything is in order to avoid problems down the road.

For example, some AMCs might need you to use an OTP to confirm that the application form was sent. It will be sent to the email address or phone number you gave when you signed up.

• Payment

Lastly, finish the deal by making the payment using the method you chose when you filled out your information. Once you’re done, a proof will be sent to the number or email address you used to sign up.

Investment in Direct Mutual Fund Scheme Through a Registrar and Transfer Agent

If you want to know how to buy direct mutual funds through Karvy or CAMS, here are the steps:

You can also buy through a company like CAMS or Karvy. But you must check with the registrar to make sure that the Mutual Fund Scheme you want to buy in is listed. If it isn’t, you need to spend in the way we talked about above. Investing through an AMC website is similar to how this works.

You can also invest in the Direct Mutual Fund Scheme through online platforms by SEBI-Registered Investment Advisers.

Advantages of Investing in Direct Mutual Funds Online

Here are a few good things about investing directly in mutual funds:

• Online buying takes less time.
• It gives you access to a wider range of mutual fund plans than you can get when you choose the offline mode.
• Once your KYC information is up to date, you can use it to invest in various Direct Mutual Fund plans on different sites.
• Also, if you sign up with an AMC, you won’t have to do it again if you want to invest in an MF plan from that company in the future.

Steps To Invest In Direct Mutual Funds Offline | How to Invest in Direct Mutual Funds Offline?

If investing online is not your preference, invest offline by following these steps: 

Step 1: Select The Mutual Fund Scheme And Visit The Institution 

You can visit the following financial institutions to invest offline in your selected direct mutual funds. 

• Asset Management Company 
• Bank 
• CAMS or Karvy Office 

Step 2: Fill KYC Form 

Submit a completed KYC form. The following documents are requested to verify your identity: 

• PAN Card
• Proof of Identity (Voter ID, Passport, Aadhaar Card or Driver’s Licence)
• Proof of Address
• Passport-Sized Photograph

Also, you will have to fill out a common/SIP entry form. If you want to pay for your investment in parts, you need to fill out a NACH Mandate. With the NACH Mandate, you agree that the asset management company can take a SIP amount out of your account automatically every month on a certain date.

Step 3: In-Person Verification 

Visit any of the following institutions: 

• CAMS/Karvy office
• KYC Registration Agency 
• AMC
• Registrar 

Step 4: Payment 

You can bring your application form, a check or demand draught, and any other necessary papers to the institution you’ve chosen. After the deal is finished, you will get a folio number for your payment and a record of your account.

How To Invest In Direct Mutual Funds via a Mobile App

You can also apply for a Direct Mutual Fund through mobile apps of brokers like Upstox. You can spend at any time and from any place.

Investing through an app doesn’t require any paper, and buyers can choose the mutual fund plan they want by looking at the fund’s past success, AUM, NAV, etc. The user can invest through this easy process based on how long they want to spend for, how much risk they are willing to take, and their financial goals.

Follow the steps below to invest through a mobile app:

• Download the application via the app store/play store on your phone.
• Create an account by logging in.
• Submit your documents for KYC.
• Once the registration and KYC process is completed, you can check the available funds and track their performance.
• Start investing!

Associated Costs for Investment in Direct Mutual Funds

There are costs involved in handling your money that you have to pay. They include

Expense Ratio:

It is the fee that an investor pays for the funds to be managed properly. It is worked out as a portion of the fund manager’s assets.

Exit Load:

This is the fee that is paid when an owner sells or redeems their shares in a mutual fund before the end of the agreed-upon time period. This is mainly done to stop investors from taking their money out before the time limit.

Indirect Charges:

These fees include account maintenance, trading, security transaction tax (a tax that the owner has to pay when buying and selling stocks), and so on.

Key points to note on Investing in Direct Mutual Funds

• Mutual funds offer investors the opportunity to earn inflation-indexed returns over time.
• Direct plans involve investing directly with the manufacturer, while regular plans are purchased through agents, incurring higher expenses.
• Direct plans are cost-effective, with lower expense ratios, resulting in better returns over time.
• Investors can switch from regular plans to direct plans within the same scheme, but it may have tax implications.
• Choosing between direct and regular plans depends on an investor’s ability to conduct research and select suitable funds.
• Investment in direct mutual funds can be done online or offline.
• Online investing involves completing KYC requirements, selecting a fund, opening an account, and making payments.
• Investing via the AMC website or through intermediaries like CAMS and Karvy is possible.
• Advantages of online investing include efficiency, access to a wide range of funds, and easy KYC reuse.
• Offline investing requires selecting a scheme, visiting an institution, filling out KYC forms, and making payments.
• Mobile apps from brokers like Upstox offer a convenient way to invest in direct mutual funds.
• Investors should be aware of costs like the expense ratio, exit load, and indirect charges associated with direct mutual fund investments.

FAQ on Investing in Direct Mutual Funds

Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.