How to Invest In Direct Plans of Mutual Funds?

Direct Mutual Funds are mostly preferred by individual investors who wants to save on commission fees and increase their returns upon their own investment knowledge without depending on someone and to maintain privacy on their investments. When one invests in Direct Mutual Funds, they bypass third party intermediaries like brokers and distributors, which means the cost they are saving commissions which are reflected in higher returns in their mutual fund portfolio due to having lower expense ratios as compared to regular funds which is being offered by brokers and distributors.

If you’re wondering, "How to invest in direct mutual funds in India?", there are two available methods to invest in direct mutual funds via Online as well as Offline

Choosing the Right Mutual Fund

Before diving into the investment process, you first need to decide which mutual fund to invest in. This involves:

• Understanding the type of mutual fund (equity, debt, hybrid, etc.)
• Choosing the right Asset Management Company (AMC) that manages the fund.
• Deciding the amount that you wish to invest based on your investment goals.
• Deciding the investment via a Systematic Investment Plan (SIP) or a lump sum.

How to Invest in Direct Mutual Funds Online

Online investments in direct mutual funds are convenient, save time, and allow you to invest from the comfort of your home. Below are the steps to follow.

1. Complete KYC (Know Your Customer)

• First-time investors must complete their KYC process with the AMC or flatform, which is a one-time requirement. You can submit your KYC documents once, and this will be linked to your PAN card.
• KYC can be done online or at the office of the AMC or RTA (Registrar & Transfer Agent).

2. Investing Through the AMC Website

• Select the Mutual Fund Scheme: visit the official website of the particular AMC that manages your chosen mutual fund scheme.
• Create an Account: register by filling in details like PAN, bank account information, and KYC details. Choose Direct Plan and select your preferred scheme (e.g., equity or debt).
• Choose Plan Type: Selecting the Direct funds to invest without a distributor.
• Investment Method: Choose between a Systematic Investment Plan (SIP) or a lump-sum investment. Decide whether you want to invest through Demat or Non-Demat options.
• Payment: Choose your payment method (bank transfer, UPI, etc.). Verify your details and make the payment.

After completing the transaction, you will receive a confirmation on your registered email/phone number.

3. Investing Through Registrar and Transfer Agents (RTA)

• You can also invest directly via RTAs such as KFin Technologies or CAMS, provided the fund is registered with them.
• The process is similar to investing through the AMC’s website. Ensure the fund is available through the RTA platform and follow the necessary steps.

4. Investing Through Online Platforms

• Several SEBI-registered online platforms also allow direct mutual fund investments. These platforms often offer tools for tracking and managing your investments [ Black by clear tax ].

Advantages of Online Direct Mutual Fund Investments

• Convenience: You can invest anytime, anywhere, without the need for physical paperwork.
• Access to a wide range of funds: Online platforms provide access to multiple mutual fund schemes.
• Reusability of KYC: Once KYC is completed, it can be used across multiple platforms, simplifying future investments.

How to Invest in Direct Mutual Funds Offline

If you prefer a traditional method, offline investments are available. Here’s how you can invest in direct mutual funds offline

1. Visit the AMC Branch

• Go to the nearest AMC branch of the fund you’ve chosen to invest in.
• Complete KYC: If you haven’t already done yet, you must complete the KYC process with documents like PAN, address proof, Bank account, etc.

2. Submit Required Documents

• Fill out the Common Application Form for mutual funds or an SIP form if you wish to invest via SIP.
• For SIP investments, you will also need to fill out the NACH Mandate to allow the AMC to automatically deduct your SIP amount from your bank account.
• Submit a cheque or demand draft for the investment amount.

3. Get Folio Number

• Once your investment is processed, you will receive a folio number (similar to an account number for mutual funds), and an account statement will be provided.

Alternatively, you can visit the RTA office for a similar process.

Key Differences Between Direct and Regular Plan:

• Expense Ratio: The Direct Plan has a lower expense ratio because there will be no distributor commissions are involved.
• Returns: The lower expense ratio means higher returns over the time compared to regular funds.
• NAV: Direct Plans have a higher NAV than Regular Plans for the same mutual fund due to the cost savings.

Should You Choose a Direct Plan?

Direct Plans are best suited for:

• Knowledgeable investors who can independently research and select mutual funds.
• DIY (Do-it-Yourself) investors who don’t need intermediary help.
• Experienced investors who can assess the risks associated with their investments.

Conclusion

Investing in Direct Mutual Funds is a great way to maximize returns by saving on commission costs. Whether you prefer the ease of online platforms or the traditional offline method, there are multiple ways to invest in direct plans. Just remember that the Direct Plan is ideal for investors who are knowledgeable about mutual funds and can make informed decisions on their own. If you're a first-time investor or require guidance, seeking advice from a registered investment advisor may help in making well-informed decisions.

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