One of the major part of financial planning today in India is investing in mutual funds. Thanks to the “Mutual Funds Sahi Hai” campaign which is getting lot of traction lately. The focus of one of these campaigns is to highlight the feature of direct mutual funds investments to save on the commissions paid to the mutual fund agent.
The campaign is being run by the Association of Mutual Funds in India (AMFI) and it aims to raise awareness about the different benefits of investing in mutual funds. Check the commercial below.
Before proceeding further, let us understand the basics of mutual funds and the difference between direct and regular plans of a mutual fund scheme.
What is a mutual fund scheme?
A mutual fund scheme is a professionally managed investment fund. The fund manager pools money from different retail / institutional investors and invests into equity, debt and other financial instruments.
As the investments are managed by experienced fund managers, the exposure of the investor is limited. The retail investors indirectly get the benefit of building well researched portfolio of investments.
The mutual fund schemes come with their own set of Pros and Cons
- Higher Returns
- Professional Management
- Wide Range of Options
- Clauses (Lock-in, Exit clauses etc)
You can choose the schemes you want to invest in wisely, based on your risk profile. Mutual fund investments will always be subject to market risks. Every investor should go through the scheme information document (SID) carefully before investing in a mutual fund.
Direct plan vs regular plans
Every mutual fund scheme comes in direct plans and regular plans. In terms of scheme both plans offer the same scheme, investing in the same stocks, bonds etc. Both plans are run by the same fund manager.
What is regular plan?
If you invest in a mutual funds scheme through a broker or a distributor, you are investing in a regular plan. Investments made through ICICI direct, FundsIndia etc come under regular plans.
What are direct plans?
If you invest in a mutual fund scheme directly without any middle man you invest in the direct mutual fund plan. You can invest directly on AMC site or through a pure advisory platform like Kuvera.
What difference does it make? Why direct mutual funds?
Regular Plans pay commissions to the broker or the distributor. This commission is added to the expense ratio of the scheme. Hence, these plans have a higher expense ratio as compared to direct plans that do not have commission expenses. When it comes to forex there are forex live chat that can provide with live and real time help.
The commissions charged in regular plans are up-to 1.5% of the investment. The same scheme with direct plan will result in much better returns.
This 1.5% additional return annually might sound like a small amount but when you view it with the power of compounding, it will make a lot of sense to ditch regular plans in favor of direct plans. The year on year benefit adds up and in just 20 years you get more than 35% higher returns on the same scheme investment.
How to invest online in direct mutual funds?
With the increased interest in direct mutual funds, a lot of platforms have started offering direct plans. Let us take a look at 5 of the top direct mutual fund platforms.
Kuvera provides a completely (100%) free direct mutual fund platform along with robo-advisory. The platform suggests which mutual fund schemes to choose, given your risk profile, time horizon and taking into account several other factors.
The platform itself is very evolved and has lots of industry first features. You can switch to direct plans in one click. Family account lets you manage mutual fund portfolio for additional family members.
2) AMC Portal
If you are very clear on where you want to invest, you can head to the mutual fund company’s portal and start investing in direct mutual fund. But you need to do a lot of management yourself like KYC, Bank accounts, NACH mandates and PAN etc. Also your portfolio are fragmented in different portals.
3) CAMS Or Karvy
If you are not looking for any smart features and just want plain investment in your self researched mutual funds scheme, CAMS & Karvy are the registered transfer agents for AMCs. All the AMCs are registered with one of these two agents. They provide a free – no frills platform with online fund transfer and managing mutual funds.
Goalwise provides free online platform to invest in direct plans. Apart from goal planning, re-balancing and SIP etc, if also provides robo-advisory like Kuvera and suggests fund selection.
5) Zerodha Coin
While Zerodha does provide a platform to invest in mutual funds, it sells both direct and regular plans. But there are no robo-advisory features built into the system. Also the platform does not seem to be completely free as it sells an yearly maintenance package of Rs 300.
Based on our analysis of the platforms which offer investments into direct plans of several mutual fund schemes, we have presented to you the top 5 most favored ways to invest. While our personal preference would be Kuvera based on ease of use and features offered, but you can select any one of the above based on your requirements and you will not be disappointed. Do let us know if you feel any other platform deserves to be in this list.