How to invest in direct mutual funds

Most investments often come with additional fees that must be paid to a broker. If you want to invest your money smartly without paying too much in fees, that's where direct mutual funds come in.

Direct mutual funds open a direct avenue into investing without the need for a middleman, like a broker, to help you buy these funds. Here, you can deal directly with the company that manages the fund, which helps you save on that extra middleman charge.

However, as with almost everything, direct mutual funds come with a caveat. While you might pay lower fees, you also need to make your investment decisions without guidance or advice from a professional. This means you need to do all the homework and research on your own to stay secure and protect your investments. But fret not, we are here to help.

Benefits of Investing in Direct Mutual Funds

The following are the benefits of investing in direct mutual funds.

Lower expense ratios

Direct mutual funds mean you pay lower fees for managing your investments, and you get to keep a larger chunk of your returns.

More control

You gain full control over your investment decisions and only choose funds that align with your financial goals, risk tolerance, and preferences without any external influence.

Transparency

With direct access to information about the fund's holdings, performance, and other relevant details, there is greater transparency in the process.

Simple Process

Investing directly in mutual funds lets you avoid the paperwork and the associated delays. This streamlined process saves you time and effort.

Investment flexibility

Direct mutual funds often have lower minimum investment requirements. Thus, you can start with a smaller amount and gradually increase your investment over time.

Long-term focus

Investing directly can help create a long-term perspective for you. This means that since you're making decisions based on your goals, you will be less likely to react impulsively to short-term market fluctuations.

How to Invest in Direct Mutual Funds

Here’s how you can invest in direct mutual funds without having to deal with any brokers or intermediaries.

Gather documents

Before buying a mutual fund, keep your PAN card, Aadhaar card, identity proof, address proof, and a canceled check or bank details ready.

Verify Online

Visit the AMC’s official website or app and submit your details to activate your KYC status.

Choose "Direct" Mutual Fund

When buying a mutual fund from the AMC’s website, make sure to pick the Direct Plan option to avoid extra agent fees.

Pick Your Fund

Research and choose the type of mutual fund that fits your goals and risk appetite.

Choose Payment Type

Decide whether to invest all at once, i.e lumpsum or through small regular payments in the form of a SIP (Systematic Investment Plan).

Make the Payment

Depending on your payment type, pay your first SIP or the lumpsum investment amount using net banking or UPI.

FAQs

What is a direct mutual fund?

A direct mutual fund lets you buy fund units straight from the fund company without using a broker or paying middleman fees.

Why do direct mutual funds have lower investment costs?

Direct mutual funds have lower investment costs as there are no brokers or agents involved; the fund company doesn't pay distributor commissions.

What documents do I need to invest in a direct mutual fund?

You need your PAN card, address and identity proofs, bank details, and an official identity document to complete your online verification.

What is the difference between lumpsum and SIP investments in mutual funds?

In mutual funds, a lumpsum is investing a large amount of money all at once, while a SIP lets you invest smaller amounts automatically on a regular basis.