Mutual funds have become a popular investment option for both novice and experienced investors. They provide a hassle-free way to diversify your investment portfolio and offer good returns over the long term. However, many investors are unaware of the difference between regular and direct mutual funds.
In this blog, we will discuss how to invest in direct mutual funds, their advantages, and the steps you need to take to get started.
What are Direct Mutual Funds?
Direct mutual funds are a type of mutual fund that you can purchase directly from the fund house without involving a middleman. Unlike regular mutual funds, which are purchased through a distributor or a broker, direct mutual funds allow you to invest in the fund house’s schemes without paying any commission to a broker.
Direct mutual funds have a lower expense ratio compared to regular mutual funds, which translates into higher returns. They are an excellent investment option for investors who want to save on expenses and increase their returns.
Advantages of Direct Mutual Funds
Here are some of the advantages of investing in direct mutual funds:
- Lower Expense Ratio: Direct mutual funds do not involve intermediaries like brokers, so they have a lower expense ratio compared to regular mutual funds.
- Higher Returns: The lower expense ratio of direct mutual funds translates into higher returns over the long term.
- Transparency: Since you invest directly in the fund house’s scheme, you have access to detailed information about the fund’s performance and holdings.
- Flexibility: You can invest in direct mutual funds through various modes like online portals, mobile applications, or the fund house’s website.
Steps to Invest in Direct Mutual Funds
Here are the steps you need to take to invest in direct mutual funds:
Step 1: KYC Verification
The first step is to complete your KYC (Know Your Customer) verification. You can complete your KYC process by submitting your PAN card, address proof, and identity proof to any mutual fund or SEBI-registered intermediary like a broker or a bank.
Step 2: Choose a Direct Mutual Fund
Once your KYC is verified, you can choose a direct mutual fund scheme that suits your investment goals, risk profile, and investment horizon. You can research various direct mutual fund schemes through the fund house’s website, research portals, or consult with a financial advisor.
Step 3: Register on the Fund House’s Website
After choosing a direct mutual fund scheme, you need to register on the fund house’s website. You can register by filling up a registration form, providing your basic details like name, email ID, and mobile number. After registration, you can access the fund house’s online portal and start investing in the scheme.
Step 4: Make the Investment
You can invest in the direct mutual fund scheme through various modes like online portals, mobile applications, or the fund house’s website. You can make the investment through net banking, UPI, or by using your debit or credit card.
Step 5: Track Your Investment
After making the investment, you should regularly track the performance of the direct mutual fund scheme. You can access the fund house’s website or online portal to monitor the scheme’s NAV (Net Asset Value), portfolio holdings, and other details.
Conclusion
Investing in direct mutual funds is a simple and effective way to diversify your investment portfolio and generate good returns over the long term. By following the steps mentioned above, you can easily invest in direct mutual funds and take advantage of their low expense ratio and high returns. Remember to do your due diligence, research the fund’s performance, and consult with a financial advisor before making any investment decisions.
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Frequently Asked Questions (FAQs)
Q: What is the difference between direct and regular mutual funds?
A: Direct mutual funds are those that you can purchase directly from the fund house without involving a middleman. Regular mutual funds are purchased through a distributor or a broker, who earns a commission from your investment.
Q: What are the benefits of investing in direct mutual funds?
A: Direct mutual funds have a lower expense ratio compared to regular mutual funds, which translates into higher returns over the long term. They are transparent and flexible, and you can invest in them through various modes like online portals, mobile applications, or the fund house’s website.
Q: Do I need to complete KYC verification to invest in direct mutual funds?
A: Yes, you need to complete your KYC (Know Your Customer) verification to invest in direct mutual funds. You can complete your KYC process by submitting your PAN card, address proof, and identity proof to any mutual fund or SEBI-registered intermediary like a broker or a bank.
Q: How do I choose a direct mutual fund scheme?
A: You can choose a direct mutual fund scheme that suits your investment goals, risk profile, and investment horizon by researching various schemes through the fund house’s website, research portals, or consulting with a financial advisor.
Q: How do I register on the fund house’s website?
A: After choosing a direct mutual fund scheme, you need to register on the fund house’s website by filling up a registration form, providing your basic details like name, email ID, and mobile number.
Q: How can I make the investment in a direct mutual fund scheme?
A: You can invest in the direct mutual fund scheme through various modes like online portals, mobile applications, or the fund house’s website. You can make the investment through net banking, UPI, or by using your debit or credit card.
Q: How can I track my investment in a direct mutual fund scheme?
A: After making the investment, you can regularly track the performance of the direct mutual fund scheme by accessing the fund house’s website or online portal to monitor the scheme’s NAV (Net Asset Value), portfolio holdings, and other details.
Q: Can I switch from regular mutual funds to direct mutual funds?
A: Yes, you can switch from regular mutual funds to direct mutual funds by filling up a switch form and submitting it to the fund house. However, switching may have tax implications, so consult with a financial advisor before making any investment decisions.
Q: What is the minimum investment amount for direct mutual funds?
A: The minimum investment amount for direct mutual funds may vary from scheme to scheme and fund house to fund house. You can check the fund house’s website or contact their customer care for the minimum investment amount.
