Investment

How to invest in direct plans of mutual funds

​What are direct MF plans?

1/6

​What are direct MF plans?

All mutual fund schemes are offered to investors in two variants: a regular plan and a direct plan. The regular plan includes commission or brokerage paid out to the mutual fund distributor whereas in the direct plan, no such costs are factored in and the benefits get passed on directly to investors. Direct plans are offered directly by the fund houses.

Mutual fund houses had introduced direct plans of schemes seven years ago as per a Sebi directive. While choosing the direct plan of a scheme, the investor must know that he needs to carry out the scheme selection on his own, at his own risk or by employing the services of a Sebi-registered, I.e. a fee-based investment adviser.

Getty Images

​Where to invest

2/6

​Where to invest

Once you decide upon the scheme in which you want to invest, such investment in the direct plan can be made online as well as offline. Offline, you need to do this by filling up an investment application form.

Getty Images

​Investing online

3/6

​Investing online

If you go the online route, either directly on the fund house website or via a transaction portal, the ‘Direct plan’ option must be selected. This will disable the requirement to enter broker code while filling up the online application form. If the investor is hiring the services of an adviser, the adviser’s registration number needs to be provided, if asked for.

Getty Images

​Investing offline/physically

4/6

​Investing offline/physically

The investment application form carries a space to write the distributor/broker code. It is important to write ‘Direct’ in that space while filling up the form. Rest of the form is identical to the regular plan.

Getty Images

​Switch to direct plan

5/6

​Switch to direct plan

If you want to move your existing investments into a direct plan, you need to submit a switch request, which involves redeeming from the regular plan and investing into the direct plan. Exit load and capital gain tax, as applicable, may have to be paid against such redemption.

Getty Images

​Also keep in mind

6/6

​Also keep in mind

  • NAV of a direct plan is higher than that of a regular plan because no commission is involved. For the same reason, the expense ratio of direct plans is lower too.
  • While these two are separate plans, the portfolio of the scheme remains the same.

Getty Images

Let’s block ads! (Why?)

Invest-Wealth-Economic Times

Leave a Reply

Your email address will not be published. Required fields are marked *