A Beginner’s Guide to Investing in Direct Mutual Funds
Direct mutual fund plans are ideal for people who have to take care of their investments alone, as they do not rely on a distributor. Plans offer a reduced expense ratio over regular plans, causing it to have a tad bit more returns in the long run. Here is how to invest in direct mutual funds online and offline while making the shift from regular plans.
How to Invest in Direct Mutual Funds Online?
Investors can easily invest in direct mutual funds using online platforms. Options include the official websites of fund houses, Registrar and Transfer Agents (RTAs), or platforms like Mutual Fund Utilities (MFU) and stock exchange portals. However, investments made through distributor platforms do not allow access to direct plans. While filling out the online form, it is essential to actively select the ‘Direct’ plan option to ensure the investment goes into the desired plan.
Invest in Direct Mutual Funds Offline
Those who prefer an offline route can invest through a physical application form of direct mutual funds. For the distributor’s ARN, it should be mentioned in the space provided with “DIRECT”. If the application form already has an ARN, it can be overwritten with “Direct” at the top in neat handwriting. The completed form, along with the payment, can then be submitted to the nearest mutual fund branch or RTA office for processing.
Switching to a Direct Plan
Existing investors in regular plans can switch to a direct plan by submitting a switch request, either online or offline. This process involves redeeming units from the regular plan and purchasing units in the direct plan. As a result, the transaction may incur capital gains tax and exit load charges.
Important Points to Keep in Mind
For a confident mutual fund investor who does not need any outside guidance for managing mutual fund investments, direct plans are more than suitable. But for one who has never known a mutual fund or one who needs an element of advice, distributor-led regular plans will be preferable. Distributors are skilled at identifying which funds align best with your investment goals and your tolerance for risk.
Direct mutual funds provide a cost-effective option for independent investors, but proper understanding and decision-making are crucial to making the most of these plans.
