How to invest through Direct Plan in Mutual Funds Online?
Mutual funds can be invested through broker or these can be invested directly on mutual fund AMC websites. Direct Plans in mutual funds provide higher returns compared to regular mutual fund schemes. However, many of us do not know how to invest in mutual funds directly. What is difference between direct plan and regular plan in Mutual Funds? This article would help investors who want to know more details about direct plan in mutual fund schemes and how one can invest through direct plan in mutual funds.
What is Direct Mutual Fund?
Mutual funds are long time investment schemes. It gives facility of managing funds in a better way by the experts. In direct mutual funds, the asset management companies hold and manage the fund by themselves without any transaction fees or commission to any brokers. There is no role of any intermediaries or agents.
Also Read: Top and Best Balanced Mutual Funds to invest in India
Mutual Funds – Direct Plan Vs Regular Plan – Comparison
The following are the major points of comparison between these plans.
- In direct plans, no brokerage would be paid to agents or brokers or intermediaries. However, in regular plans, specific %age of commission goes to agents.
- Expense ratio in direct plans is lower than compared to regular plans as there is no commission to agents.
- Net asset value of direct plan is higher than in regular plan even if both plans are of same mutual fund scheme or company.
- As the expense ratio in direct plan is low, the returns are higher compared to regular plan. However, they both have the same scheme portfolio.
What are advantages of Direct Plan in Mutual Funds?
Let us study the advantages of investing in direct mutual funds. Investing is direct mutual funds have become much stronger now a days. Let us see the advantages of investing in direct plans.
- The expense ratio is lower in direct mutual fund as there is no role of intermediaries and you don’t have to pay any transaction fee or commission to the agents
- There is huge impact on wealth as the investor gets higher returns on his investment in direct plans in long term. It is good for him investing in retirement plan as he can get benefit of 15-20 years.
- The investor gets 25 to 75 basis points higher in direct equities compared to regular plan i.e. 0.25% to 0.75% more returns per annum.
- The funds are managed by professionals in a better way to yield more returns.
- The net asset value is higher in direct funds.
What are limitations in direct plan in Mutual Funds?
It is important to do cost benefit analysis before investing in any scheme. The following are the limitations of investing in direct plans.
- The operation process is not easy for those who are not comfortable with online process. They have to visit the branch again and again for transactions. If there were mediators in between, they would have done all formalities at your doorstep.
- There is negligible difference between the expense ratio of direct and regular plan in debt category. It is not good for small size portfolio to invest in direct plan.
- It is very difficult to trace the investment records in direct plan if forgotten to be claimed. The records are not centralized and it becomes difficult to store and remember the records of all schemes separately if invested in different funds.
- Documentation is the major drawback in direct fund as it requires a separate complete set of documentation for every mutual fund investment.
- As no mediators or agents are appointed, there is nobody to guide and give full information about the schemes and investment. It is not that agents gives a biased information as if they do so, the customer losses faith in the agent and will not do any further transaction with them.
How to Invest In Direct Plans of Mutual Funds?
You can invest in direct pans of mutual funds both online and offline. Following are the steps to invest in direct plan of mutual funds.
First, get your KYC documents verified if not done for opening an account. Submit your KYC documents with photo id and address proof to the branches of bank/ MF/distributor/CAMS/ karvy offices.
How to Invest In Direct Plans of Mutual Funds Online?
Go to the website of the asset management companies (AMC) through their online portals whose mutual fund you want to invest in e.g. hdfcmutualfund.com. Create your portfolio in AMCs. You will find two options ‘DIRECT’ and ‘THROUGH DISTRIBUTOR’. Click on ‘DIRECT’ option.
Fill the details in application form and select ‘direct’ option in mode of investment.
You have to log in to each AMCs to make your investment.
Investing in Direct plan of MFs – Explained with an example
- Login to reliancemutual.com
- Click on online investment
- Fill the details like equity class (equity or debt),
- Enter / select Scheme Name,
- Select mode of investment select them as “Direct”
- Select scheme plan “Direct plan” or “Regular plan”
- Select “Growth” or “Dividend”
- Proceed and make payment and your transaction is executed.
Also Read: Top Sector Based Mutual Funds that can give you amazing returns
How to Invest In Direct Plans of Mutual Funds through MF Utility Online?
You can invest through MF utility.
MF Utility is a shared infrastructure of all AMCs in India to provide online investment facility to mutual fund investors. MFU is sponsored and funded by the mutual fund houses. MF Utility (MFU) is a browser-based application that connects investors to registrars and transfer agent (RTA), bank, fund house, payment gateway KYC registration agencies (KRAs). You can know more about MF Utility, its features and how to invest through this platform here.
How to Invest In Direct Plans of Mutual Funds Offline?
If you are investing in mutual funds through paper / filling up the forms, then select the option ‘Direct’ plan in the investment form. The agent will put his ARN code in the form. (He will not get commission on transaction). If there is no direct option in the form, write direct in the ARN column.
Once your KYC documents are verified and approved, submit the SIP form and MF application to the AMCs along with the cheque of the investment amount.
An existing investor can switch from regular plan to direct plan by submitting the switch request form to AMCs.
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How to invest through Direct Plan in Mutual Funds Online
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Sir I am invest in regular plan so how to change direct plan pls help me
Hi Kabilazhagan, There is no option to change from regular plans to direct plans. You need to sell regular plans and buy direct plans. Alternatively you can buy / do SIP in direct plans and keep the regular SIP plans
Will we get the benefits of direct plan if we invest through the branches of fund houses like Reliance Mutal Fund?
Thank You for giving such a good information regarding direct mutual funds
thank you Sachin