How To Invest In Direct Mutual Funds Without An Agent

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January 10th, 2020   |   Updated on June 28th, 2022

Mutual fund investments have become the preferred investment avenue by Indians in recent years. To cater to different investor types, currently there are two mutual fund schemes available – direct and regular mutual funds.

In the case of the direct mutual fund, there is no mediator or broker present while in case of regular, individuals avail advisory and investment assistance from brokers and hence a part of their returns is paid to the agents as a commission by the asset management company. Consequently direct mutual funds fetch better returns.

If you are not sure about how to invest in direct mutual funds, you can go through the steps mentioned ahead in this article. Here, you will also know some knowledgeable facts regarding direct mutual fund investments.

Direct Mutual Funds: Definition

A mutual fund direct plan basically allows investors to purchase a mutual fund plan directly from investment portal or asset management companies without the intervention of agents or middle men.

Earlier when mutual funds were still a new idea in India, people went to brokers or agents to start mutual fund investing on their behalf. The brokers in turn earned a commission or a fee for their service.

As investors themselves for not aware of the procedure, they often felt limited in fund choice, had difficulty tracking and managing their investments and were totally dependent on agents for necessary investment options like stopping an SIP or stepping SIP up.

However, nowadays there are many investment portals that allow investors to invest with ease on their own as well as provide the necessary resources to aid decision making.

In such a scenario it becomes all the more prudent for investors to select on direct mutual funds and save money on commissions.

In case of a direct plan, the investor has the total independence to make decisions regarding the investments.You can easily make yourself aware of how to invest in mutual funds directly without a broker using the content and resources available now.

Procedure To Invest In A Direct Mutual Fund

Anyone can invest in the mutual fund in a direct process. No matter the AMC, the investment procedure remains more or less the same. You can go through the steps mentioned below in detail to get a clear idea on how to invest in direct mutual funds.

1. Complete The Paperwork

Any investor desiring for a direct mutual fund investment has to complete the basic paperwork. There are two ways in which one can approach purchasing a mutual fund such as the standard mode and the online mode.

The only difference between the two is that an investor needs not to visit the bank in case of the latter.

In case of a direct mutual fund, you must complete the formalities concerning the KYC. Moreover, as an investor, you need to mention your Aadhaar and PAN details. Once the KYC verification is complete investors can choose the fund to invest in.

2. Choose The Scheme

The schemes of the mutual fund direct plan depend fully on the financial goals of the investors. In the online platform of your AMC, you can easily customize your MF investment.

Say, you choose HDFC mutual fund as your preferred AMC. Under that You can add multiple funds to your portfolio across asset classes like debt , equity, hybrid and choose the preferred mode of investing – SIP or Lumpsum.

3. Completing The Purchase

Once you are done with choosing your scheme, you can complete the order by purchasing the mutual fund.

By following the instructions given on the website, you can pay off the charges to your Asset Management Company for the maintenance of your MF. Usually there are multiple payment options available for the ease of customers.

Here are some important facts about the direct mutual funds that you need to know in order to efficiently manage your investment.

4. No Demat Account Is Needed For A Direct Mutual Fund

As an investor, you will not need a demat account to purchase a direct MF. The demat account is needed in case of the regular mutual fund setup due to the presence of brokers and other investors.

5. A Direct Mutual Fund Provides The Chance To Invest In Both Sip And Lump Sum

When an investor chooses a scheme, say, HDFC balanced fund, he can invest in both SIP and one-time lump sum investment manner.

If you expect to maximise your returns, always try to invest in a Systematic Investment Plan. The market risks rarely put an impression on investment in the SIP manner.

6. A Long-term Investment In Direct Fund Has A Good ROI

You must always remember investing in a direct mutual fund for a longer tenure. In the case of long-term investment, you can get balanced returns where there will be no lump sum depreciation due to the adverse condition of the market. Always have an aim to continue a mutual fund investment for 5 years or more than that.

7. Switching To Direct Mutual Fund From A Regular One

If an investor wants, he can easily switch from a regular plan to a direct plan of a mutual fund.This can be done via the investment platform or the AMC selected by requesting a switch-over. However, please note applicable exit loads have to be paid to make the switch.

Other than laying importance on the steps mentioned above, an investor also needs to have a proper understanding of direct mutual funds.

Investors can explore various mutual fund investing platforms that facilitate investing in mutual funds directly without a broker. The investors should also try studying about various mutual funds before he purchases one.

As there are several business entities dealing with mutual funds, you can easily choose one that demands reasonable charges concerning the maintenance of the mutual fund.