Investing in direct mutual funds in India has its own set of advantages over regular mutual funds. One of them being able to trade with the businesses directly. But the question that arises here is how and where to find the mutual funds you are planning to buy. This blog will answer this question and explain why you must invest in direct mutual funds if you are a rookie investor.
Why invest in Direct Mutual Funds:
Since no distributor/agent is involved in the Direct Plan, it has a lower expense ratio than the Regular Plan. As a result, there is a saving in distribution costs/commissions paid out to the distributor/agent, which is added back to the scheme’s returns. As a result, a Direct Plan has its NAV, which is higher than the NAV of a “Regular” Plan.
The Direct Plan’s lower expense ratio leads to more significant investment returns, which compound over time in the long run. As a result, an investment in the Direct Plan would be valued more over time than an investment in the Regular Plan of the same program. However, it should be noted that the difference in NAV between the Direct Plan and the Regular Plan is usually minor.
How to invest in Direct Mutual Funds
The default place to invest in a Direct Plan online is through the mutual funds’ websites or online platforms of stock exchanges, Mutual Funds Utility (MFU), or other digital channels. There are a few online portals that allow you to invest in Direct Plans as well. On the other hand, such online portals are controlled by private companies that provide Robo-advisory financial planning services for a cost – which might be per year or transaction.
Please keep in mind that not all web portals offer Direct Plans, even if they allow you to invest in mutual fund schemes. You can also invest in Direct Plan by submitting a physical application form, along with a check or demand draught, to the concerned mutual fund’s investor service center/branch or its registrar and transfer agent (RTA). On their Internet banking portals, several banks provide the possibility to invest in MF plans. Because financial intermediaries, such as banks, are mutual fund distributors, they do not and cannot provide Direct Plans on their websites.
While the Direct Plan is appropriate for the competent, it may not be appropriate for all investors, particularly new and inexperienced ones. Suppose you are an inexperienced investor or unsure which scheme to engage in and require investment guidance/assistance. In that case, you may be better suited to obtaining the advice of a mutual fund distributor and investing in the Regular Plan.
This is where we step in to help you with the process. Tradeplus has its mutual fund platform- Infini, where you can directly buy mutual funds by comparing it with its peers. The platform is also in Android and iOS, enabling you to buy mutual funds anywhere in the world without paying any transactional costs. The platform also provides an additional 1.5% extra returns. Also, as a newbie investor, if you are looking for other investment vehicles to learn the art of trade, you can refer to our module here.