Direct Mutual Fund is a boon to the mutual fund investor. Investment in direct mutual fund always gives better return because of the lower expense ratio. So, it makes a sense to consider direct mutual funds as an investment option. However, very few people know about direct mutual funds. So, today let’s try to demystify direct mutual funds and method to invest in direct mutual fund plans.
What is direct mutual funds?
Direct mutual fund is special category defined by AMC which allows direct investment in mutual funds. You need not to approach any distributor or agent in order to invest in these types of mutual funds. You can invest in the fund directly. All direct plans are identified by prefix – direct to the name of mutual funds.
Such separate plan shall have a lower expense ratio as distribution expenses, commission, marketing expense is not applicable to these type of funds. The plan shall also have a separate NAV.
How to invest in direct mutual fund plans?
There are three different ways to invest in direct mutual funds.
- A fund house website
- myCAMS online investment portal
- MFU portal
(1) Fund house website
Steps to purchase fund online via fund house website is given below.
Step-1 – Register to fund house website. You need to do this for every website individually.
Step -2 – Select old portfolio or register for new portfolio.
Step-3 – Select the scheme, amount and SIP details.
Step -4 – Transfer funds online via Netbanking or provide payment details.
Step-5 – Once fund transfer is done fund will be purchased and transaction details will be emailed to you.
It is a very tedious exercise to purchase fund from multiple website as it required dedicated effort and time. A better method to purchase direct fund is via myCAMS or MF utility.
(2) myCAMS online investment portal
myCAMS is a unique platform that allows an investor to invest in multiple mutual funds from a single place. You can even invest in the regular plan using myCAMS platform. Steps to purchase direct fund online via myCAMS is given below.
Step -1 – Visit www.camsonline.com and click on myCAMS link.
Step-2 – Register for new user id or login in account using existing id.
Step -3 – Select the scheme, amount and SIP details
Step -4 – Select payment method and purchase mutual funds online.
(3) Mutual fund utility portal – MFU
Mutual fund utility portal MFU is similar to myCAMs it allows you to invest in multiple mutual funds using single platform. Steps to be follow for investing in direct mutual funds via MFU is given below.
Step-1 – First you need to get Common Account Number (CAN) from MFU. In order to get CAN you need to fill up CAN registration form.
Step-2 – Fill up CAN form and submit it along with required document to point of service location of MFU.
Step-3 – You will get CAN number after sometime. Once you get CAN number you need to send email to firstname.lastname@example.org to get online access.
Step -4 – You will get login details from them. You can login using this details and start purchasing direct mutual funds.
Direct Mutual Funds Plan Vs Regular Mutual Funds
Direct funds gives better return compared to regular mutual funds. It is because of less expense ratio of fund. In order to justify this fact let’s take a look at return given by direct mutual funds and regular mutual funds.
From above example, it is clear that direct mutual funds always gives 1-2% higher return.
Suppose you had made an investment of 10 Lakh in ICICI Prudential Value Discovery Fund – Direct Plan in 2013 & your friend has made invested a similar amount in ICICI Prudential Value Discovery Fund – Regular plan. After three years your holding value would be 24.20 Lakh (@34.24%) and your friends holding value would be 23.40 Lakh (@32.91%). So you would have made more money compare to your friend.
Are direct plans for you?
Direct plan is not everyone’s cup of tea. You should invest in direct mutual funds only if you satisfy following conditions.
- If you are a savvy Investor and can select scheme on your own.
- If you already pay fees to your adviser or financial planner.
- If you don’t want the risk of a distributor or financial adviser.
If you are a beginner or if you are unable to select a scheme for an investment you should not opt for direct mutual funds.
Do you invest in direct mutual funds?
Do share your views in the comment section.