How to Invest in Direct Mutual Funds Online
There are two modes available for investing in direct mutual funds in India: Online and Offline.
The initial step is to select the fund for investment, considering the fund type and the corresponding Asset Management Company (AMC). Investors should decide whether they want to invest based on their goals and choose between a Systematic Investment Plan (SIP) or lump sum deposits.
Steps for Buying Direct Mutual Funds Online
After determining the fund type, AMC, and investment amount, proceed with the Know Your Customer (KYC) formalities. This one-time process requires your PAN, as AMCs inquire about the linkage of your PAN with your KYC details.
Investing in Direct Mutual Fund schemes online can be done through the Asset Management or Mutual Fund Company’s website or the Registrar & Transfer Agent (R&TA). The following methods explain how to buy direct mutual funds online in India.
- Through the Asset Management Company Website:
- Open an MF account with the AMC.
- Choose the mutual fund scheme.
- Under ‘Plan Type,’ select ‘Direct.’
- Choose the scheme (Dividend or Growth).
- Fill in the investment details.
- Select other crucial investment details (SIP or Lump-sum, Demat or No Demat, Mode of payment).
- Confirm details with the bank.
- Verification of Details:
- Verify all entered details.
- Some AMCs may require OTP validation, sent to your registered email ID or mobile number.
- Conclusion of the Transaction:
- Make the necessary payment via your chosen method.
- A confirmation will be sent to your registered number or email ID.
Investing in Direct Mutual Funds through KFin Technologies Limited or CAMS:
If considering investing through KFin Technologies Limited or CAMS, follow the steps below. Ensure the chosen Mutual Fund Scheme is registered with the registrar, and if not, opt for the method mentioned above. The process mirrors that of investing through an AMC website. Additionally, you can invest via online platforms provided by SEBI-Registered Investment Advisers.
How to Invest in Direct Mutual Funds Offline?
For those with reservations about online investments, the Offline Method is an alternative. Physically fill and submit a Mutual Fund Form through two options:
- Visit the nearest office of the Asset Management Company:
- Complete KYC if not compliant, with required documents.
- Submit a self-attested copy of PAN and address proof.
- Submit the Common application form or SIP form.
- For SIP, fill out a NACH Mandate.
- Provide a cheque or demand draft for the investment amount.
- Local RTA Office:
- Follow a similar process.
Advantages and Disadvantages of Direct Mutual Funds
When it comes to direct mutual funds, there are several advantages and disadvantages to consider:
Advantages:
a. Lower expense ratios
b. No commission paid to distributors
c. Direct interaction with the fund house
d. Higher returns over the long term
Disadvantages:
a. Lack of personalized advice
b. Limited research available
c. No guidance on fund selection
Can We Switch Mutual Funds from Regular to Direct?
Yes, investors have the option to switch their investments from regular mutual funds to direct mutual funds. This process allows them to benefit from lower fees and potentially higher returns.
What Are Direct Mutual Fund Charges?
As the name suggests, direct mutual funds do not involve any intermediary, helping the mutual fund company to save the amount that would typically be paid to such intermediaries. This is the reason direct mutual funds have lower charges compared to regular mutual funds. The charges involved in direct mutual funds are – expense ratios, exit loads, and transaction fees.
Is There a Tax on Switching Mutual Funds from Regular to Direct?
There may be tax implications when switching from regular to direct mutual funds. Investors should consult with a tax advisor to understand any potential tax liabilities before making the switch.
Is Direct Mutual Funds Safe in Long Term?
Direct mutual funds serve as secure investment tools over the long term. The key thing for investors is to carefully choose reputable fund houses and diversify their portfolios. By doing so, investors can effectively mitigate risks and position themselves for higher returns over time.
Best Platforms to Buy Direct Mutual Funds
Investors have got several online platforms available for them to purchase direct mutual funds in India. Some popular options include – Groww, Zerodha Coin, Kuvera, PayTm Money, ICICI Direct and ETMoney. All these platforms have a user-friendly interface and give customers access to a wide range of funds.
Top Direct Mutual Funds for Long-Term
Some top-performing direct mutual funds in India in 2024 include Nippon India Multicap Fund, Baroda BNP Paribas Aggressive Hybrid Fund, Tata Small Cap Fund Direct Growth, Axis Bluechip Fund, Mirae Asset Emerging Bluechip Fund, and ICICI Prudential Bluechip Fund.
Difference Between Direct and Regular Mutual Fund Plans
The main difference between direct and regular mutual fund plans lies in the way an investor buys them. Direct plans mean an investor will buy them directly from the fund house, while regular plans go through a distributor. With this distinction in place, fees, returns and the level of involvement investors have in their investments vary.
Return Difference between Direct and Regular Mutual Fund Investments
In general, direct mutual funds give better returns than regular mutual funds as fund houses don’t have to pay any commission to any intermediaries. Over the long term, this saving results in higher portfolio growth and increased wealth accumulation for investors.
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Conclusion
In conclusion, buying direct mutual funds online in India helps investors save on fees, resulting in higher returns for them. With direct mutual funds, they have more control over their investments. By understanding the advantages and disadvantages of direct mutual funds, selecting the best platforms, and choosing top-performing funds, investors can make informed decisions that align with their financial goals. Whether you are a seasoned investor or just starting, direct mutual funds can be a valuable addition to your investment portfolio. Start exploring your options today and make the most of your money.
