When investing in mutual funds, making the right choice can significantly impact your returns. In recent years, direct plans of mutual funds have gained popularity among savvy investors in India. These plans offer several advantages, making them a compelling option for those seeking good returns
What are the direct plans of mutual funds?
Direct plans are mutual fund schemes that allow investors to bypass intermediaries such as brokers or distributors. Unlike regular plans, which pay commissions to these intermediaries, direct plans enable investors to invest directly with the asset management company (AMC). In other words, direct plans cut out the middleman, providing investors with a more cost-effective and transparent investment option.
Features of direct funds
Lower expense ratio: One of the primary benefits of direct plans is their lower expense ratio. The expense ratio refers to the annual fees the mutual fund company charges to manage the fund. In regular plans, this fee includes commissions paid to distributors. However, direct plans eliminate these commissions, resulting in a lower expense ratio. Over time, even a slight expense reduction can lead to significant savings and enhance your overall investment returns.
Good returns: Since direct plans do not involve distributor commissions, the returns generated are typically higher than regular plans. The savings from lower expenses get compounded over the long term, allowing your investments to grow faster. Over time, this can translate into substantial wealth accumulation, making direct plans an attractive choice for wealth creation.
Transparency: Direct plans offer enhanced transparency as investors can access information about the fund’s performance, portfolio holdings, and other key metrics. This transparency enables investors to make well-informed decisions based on accurate and up-to-date information. Additionally, investors can directly interact with the fund house for queries or clarifications, ensuring complete transparency throughout the investment journey.
How to invest in a direct plan?
Investing in direct plans is relatively straightforward and accessible for Indian investors. Here’s a step-by-step guide to help you get started:
Choose the right mutual fund: Research different mutual funds and understand their investment objectives, past performance, and risk factors. Select a fund that aligns with your financial goals and risk appetite.
Visit the fund house website: Once you have identified the mutual fund, visit the official website of the fund house. Most fund houses have a dedicated section for direct plans, where you can find detailed information about the fund, its performance, and the application process.
Complete the application form: Download it from the website or request it through email. Fill in the required details accurately, including your personal information, investment amount, and bank details.
Submit the application: After completing the application form, submit it with the necessary documents, such as identity proof, address proof, and PAN card, to the fund house office or their authorized collection centers.
Start investing: Once your application is processed and approved, you can invest in the direct plan. You will receive an account statement or an online login to track your investments and monitor their performance.
To wrap up
Direct plans of mutual funds offer several advantages over regular plans, making them an appealing choice for investors in India. By investing directly in mutual funds, you can take control of your investments, reduce costs, and maximize your wealth creation potential.