How to Invest in Direct Mutual Fund Schemes? Be aware of Brokerage charges!

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Why invest in Direct Mutual fund Plans?

Just to know the background of Mutual funds, Each fund will charge you money for managing your money. The charges vary from Fund to Fund, these will be within the guild lines of SEBI.

There are two ways of investing in the same fund, one is Directly purchasing from Fund company, second Investing through any intermediaries, brokers, agents,  distributors or Demat Brokers etc.

Why there is a difference in returns in Direct Vs Regular Mutual fund plans?

The advantage of the Direct Plan is it has low Expenses compared to the Regular plan offered by agents.  Reason being, you are buying the units directly from the fund house. The fund house passes the portion of trail commission savings to the investor which are otherwise given to Agents in Regular plans.

Generally the difference between Direct fund Expense ratio Vs, Regular Fund Expense ratio will be around 1.5%.  Higher expense ratio in the regular plan where a portion of the return is given to the distributor/Agents/Brokers.

Remember, this amount is not as small as you think. for monthly SIP of 5000/- for 25 years, Benefit for going with Direct plan vs Regular plan is around Rs. 28Lacs which is a lot of Money!

This amount is charged from your fund in the background by Mutual fund company, many brokers will fake it as No charges by going through them., which is just a trap. You will straightaway lose above money.

You may like to read How to earn High Returns from your cash/ Bank Balance- Liquid fund is the Answer!

How to check if you are investing in Direct or Regular funds?

Many investors don’t even know whether they are investing in Direct mutual fund schemes or Regular plans.

  1. The direct fund will always have the word “Direct” in their scheme name
  2. Regular funds (which has agency commission) may have word ” Regular”  in their plan name or it will be silent without Any mention of Regular or Direct.
  3. Check through which platform you have taken this fund, if you have taken from any demat account it will be regular only. Point no. 2 will apply.

Why most of the people not investing in the direct plans?

Almost 80% of investors today are investing through any agent/Broker by paying hefty charges at the background. Many people are not even aware of these charges.

They are not aware that you can use “internet” to buy the mutual fund and do not need a distributor/broker for that. A few years ago, it was not possible to buy a mutual fund directly, but now it is possible.

If you are reading this article, I can safely assume that you know how to use the internet. Hence, please use it and invest in the direct plan to get more returns on your hard-earned money.

Also, many investors wanted all their mutual fund investments at one single platform, which generally provided by all Demat brokers.

However, nowadays many platforms allow you to invest in Direct plans at one place without having any charges.

How to invest in direct mutual funds at one place/One platform?

  • Mf Utility website
  • Karvy
  • Mycams
  • Money Control
  • Coin by Zerodha
  • Bharosa Advisor
  • Clear funds
  • Many others

There are various ways of investing in Direct mutual funds, But the best way to invest in Direct Mutual Funds is through MF utility website.

You can Do it Yourself online, Completely electronic!. This is just an interface between the fund company and you.

You can invest across most of the mutual fund companies. I am currently using this website. I am not benefitting either directly or Indirectly by promoting their name here.

In case if you have invested in Regular plans through a broker, you may switch to Direct mutual fund plans by redeeming and Investing the same amount again in direct plans, keep your exit load and tax liability in mind before switching.

Don’t exit the investment in the old regular mutual funds plans immidaltey, Just stop future SIPs. See your Exit charges/Tax implication of regular plan, if no exit charges, you may exit and move your money to Direct mutual fund plans.

 

Also, read Why you should never go for Traditional Endowment Life Insurance plans? Term insurance is the Best option!

It is good to have awareness about direct mutual fund plans, nowadays many websites are encouraging investors to direct mutual funds. Investing in direct and regular mutual fund plans has its own merits and demerits, You need to be cautious before taking any decision.

Websites which provide the platform to invest in direct mutual plans are having very poor marketing skills, compared to others as they do not earn anything from this. For selecting mutual funds plans you may refer CRISIL rating and value research ratings etc.

If you like this article, please share it with your friends and Family.

You may like to read http://www.usefulfunds.com/thumb-rules-in-investing-equity-mutual-funds/


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  1. Thanks for pointing out

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