One sunny day, Mr Naive and Mr Pro were conversing about money and investments. Mr Pro mentioned that direct investing in mutual funds had been a game-changer for him as he manages his funds solely now. Mr Pro then clarified that he does not invest through any intermediary; rather, he invests in mutual funds all by himself. Mr Naive was rather surprised and requested Mr Pro to explain in detail how to invest in mutual funds directly. Mr Pro then explained in detail all about Investing in Mutual Funds directly.
With a direct investment in Mutual Fund, you can purchase mutual funds straight from the AMC or fund company via investment in the direct plan of the mutual fund scheme, cutting out the intermediary distributor. In addition, by Direct investment in Mutual Funds, you avoid paying significant fees that are paid to the distributor.
So, the benefits to the investor are:
● Better control of funds
● The flexibility of fund management as control is with investors.
● Ease of investing as both online and offline options are available.
Mr Naive seemed delighted to learn all this. As he began understanding direct plan in mutual funds, his curiosity was higher. So, he requested Mr Pro to explain the investing methods in detail. Mr Pro explained the online option as follows:
Assume you would like to invest in a mutual fund scheme via direct plan:
You have to go to the said mutual funds’ website/Mobile application → Create your account by completing KYC if you are a first-time investor. If you are already KYC Compliant, your PAN number will suffice → Find the mutual fund scheme you want to invest in → Select Direct as the mode of investing →Choose between options like IDCW option or growth option , lump sum or SIP, Demat or Non-Demat → Fill in Date of Birth, Contact Details, Tax Status, Mode of holding, Additional KYC, FATCA, Nomination details →Fill in bank details like Account number, IFSC code, bank name →Proceed for payment and complete the transaction.
Mr Naive wanted to understand if there are more methods to transact online, to which Mr Pro confirmed that the transaction could be done through Registrar and Transfer (R&T) Agents like CAMS or KARVY if the Mutual funds schemes are registered with these agents. Another way of direct investing in mutual funds is through Mutual fund Utilities; this option gives you the benefit of mutual funds investment from multiple AMCs by creating a Common Account Number (CAN) which can be used to transact across AMCs and view the consolidated investments.
For the offline option, you will have to visit the branch office of the concerned AMC. You must fill up all the requisite details, complete the KYC, and submit all the self-attested proofs. Next, you must fill up the standard application or SIP as desired and select ‘Direct’ for investing in direct plan in mutual funds.
Now Mr Naive felt super confident and could not wait to try this option and apply all the new knowledge. Mr Pro, at this point, issued a word of caution as direct option in mutual funds investment requires the investor to conduct extensive research in the various funds and constantly monitor. He suggested you start by learning about the fund, its performance, its associated risk, and the past returns across market cycles. Also, since the same fund is offered in both direct plan and regular plan, you could study your current funds and go for a direct plan in one of them to understand this process better.
Mr Naive now completely understands how you can invest in direct plan in mutual funds, provided you have the knowledge and the understanding. He also deciphered that you’d need some patience and study to get right about your choices of mutual funds investments.
Disclaimer:
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.
