Mutual fund schemes offer regular and direct plans. A regular plan involves investing through a distributor/broker/agent. It has a higher expense ratio because of commissions paid to agents. One can invest through the direct plan that enjoys a lower expense ratio.
Who can invest?
Anyone can invest in a direct plan of a mutual fund scheme. However, the investor must understand if the scheme is appropriate, taking into account its track record, the investor’s goal and risk profi le. A new investor may need the help of an adviser/distributor.
How to invest?
In a direct plan, the investor does not have the help of an adviser when doing the paperwork. A DIY investor needs to fill up the application form and mention “DIRECT” on it. An easier way of investing in direct plans is through online portals. There are various online platforms for direct investing:
- Transaction portal on the mutual fund website.
- Transaction portals hosted by the registrar and transfer agents of mutual funds.
- Robo adviser platforms, online direct investment portals:These platforms provide investment recommendations to investors on the basis of certain details keyed in by the investor.
- MF utilities platform.
The investor must comply with the prerequisites for mutual fund investing before investing in direct plans.
- Investor should have a PAN (unless specifically exempt), Aadhaar number, bank account.
- KYC formalities should be completed. The investor also has the option to complete Aadhaar based KYC if the KYC has not been completed earlier.
Points to note
1. You can convert existing regular plan investments to direct plan by making an application to the mutual fund.
2. One can make lump sum investments or set up an SIP and carry out all transactions using the direct plan.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)