Which is better, between direct and regular funds?

Direct funds mean that the investor is investing directly through the fund house without any intermediary or broker, which results in lower expenses and transaction fees. The returns earned are usually higher than regular funds. However, the decision to invest in a regular or direct fund should be guided by investment and financial goals and risk tolerance.

Who should invest in direct mutual funds?

Direct funds are more suitable for investors who are knowledgeable about the market and can make financial decisions without a distributor or agent.

Can I switch from regular mutual funds to direct mutual funds?

Yes, investors can switch from regular mutual funds to direct mutual funds within the same fund family. This process is known as "switching," but it's essential to consider exit loads, tax implications, and the specific rules of the fund house when making the switch.

Are direct funds safe?

Direct funds are regulated by SEBI. Most of the Fintech companies that offer platforms for direct mutual funds are registered with SEBI.

Are direct funds risky?

Direct funds themselves are inherently risky; their risk level is determined by the underlying assets they invest in, such as stocks or bonds. Because direct funds do not involve intermediaries, investors may face higher risks if they lack knowledge or experience in making investment decisions independently.

How can I track my direct mutual fund investments

You can easily track your direct mutual funds online through the fund house/online platform’s official website or mobile app. After logging in, you can see your portfolio, NAV updates, and overall returns. You can also use mutual fund registrars like CAMS or KFintech, which let you view all your holdings in one place. Regularly checking your account helps you stay updated on performance and make better investment decisions.

What are the charges for investing in direct mutual funds?

The direct mutual fund charges are very low compared to regular plans because there are no broker or distributor commissions. You only pay the fund’s expense ratio, which covers fund management and operational costs. This makes direct mutual funds more cost-effective and helps investors earn slightly higher returns over time.

Can beginners invest in direct mutual funds?

Yes, beginners can invest in direct mutual funds if they are comfortable making their own choices. These plans are simple to access online, and many fund houses offer easy tools to compare and invest. However, beginners should spend some time understanding mutual fund basics or seek guidance to make informed decisions.

Are direct mutual funds suitable for long-term investors?

Yes, long-term direct mutual funds are ideal for investors who want to build wealth over time. Since they have lower costs and no commission charges, the savings can compound into higher returns in the long run. Investors with long-term goals like retirement or child education can benefit the most from staying invested in direct plans for several years.

What are Direct Mutual Funds?

Direct mutual funds are investment schemes you purchase directly from the mutual fund company, with no middlemen or agents. This entails no commission charges, and your returns can be higher than regular mutual funds in the long run. The meaning of direct mutual fund is straightforward: You transact directly with the fund house rather than through a broker or advisor.

Key Takeaways

Direct mutual funds are the ones where you invest directly through the AMC (Asset Management Company), without any broker, agent, or intermediary.

The expense ratio in direct mutual funds is generally lower because the AMC doesn’t have to pay distribution commission to the intermediaries.

Direct mutual fund investors conduct their own research and manage their own portfolios, no advisory services are available.

To invest, you can directly visit the AMC website and complete the necessary formalities.

Understanding Direct Mutual Fund?

An investor in a direct plan must invest directly with the AMC, with no intermediary to help with the transaction. As a result, since there is no distribution charge, the direct plan has a lower expenditure ratio. This simply means that the plan is ideal for investors who are okay with making their own choices and evaluating funds online. It's an inexpensive method of investing, particularly for investors who want to make their money grow with less cost and more autonomy.

How Does a Direct Mutual Fund Work?

In the case of a direct plan, direct investments should be done with the AMC. The investors need not be involved with a distributor to carry on the transaction. On the contrary, investors make their investments in a regular plan with the support of an intermediary. This could be a broker, distributor, or banker. They receive a distribution fee from the AMC, which gets deducted from the plan.

How to Invest in Direct Mutual Funds?

Mutual fund investing is a simple process and can be done through the medium of AMFI-registered platforms, apps, or official fund house websites. The first step for investors is to complete their KYC (Know Your Customer) process. This includes the submission of your PAN, Aadhar card, and bank details. Once the KYC is verified, investors have access to direct mutual fund schemes.

After the KYC has been approved, investors can directly visit the website of the mutual fund company or use online investment companies to purchase the direct plans. On the basis of their financial goals, they need to make the selection between lump sum or SIP (Systematic Investment Plan). Direct plans offer clarity on the fund performance without the involvement of the distributor.

Once the investment has been done, tracking and managing direct mutual funds can be easily done with online dashboards or with the apps. Investors have the choice to redeem or change the funds as and when desired. With no intermediary charges, direct mutual funds provide better returns over time, making them a great choice for cost-conscious investors.

Investing in direct mutual funds is easy and a good choice. Open your mutual fund accounts today and take complete charge of your investments.

Differences between a Regular Plan and Direct Plan in Mutual Funds

Understanding the direct vs regular mutual fund difference helps investors choose the right plan for their financial goals.

Feature	Regular Mutual Funds	Direct Mutual Funds
Distribution Channel	Sold through agents and brokers	Bought directly from the asset management company
Expense Ratio	High expense ratios because of intermediaries' commission	Low expense ratio, as there are no commissions
Returns	After deducting expenses, comparatively low returns	Due to low expenses, high returns
NAV (Net Asset Value)	Slightly lower	Comparatively higher
Investor Interaction	No direct interaction with the fund house	Direct interaction with the fund house
Transaction Convenience	Direct online or offline transactions. Includes paperwork and intermediaries for transactions.	Direct online or offline payments with the fund house
Mode of Investment	Suitable for investors seeking guidance and advice.	Suitable for investors with self-research and decisions

Knowing the direct and regular mutual fund difference helps investors make smarter, cost-effective investment decisions.

Also Read, What is Expense Ratio in Mutual Fund?

What is The Best Way to Invest in Direct Mutual Fund Plans?

Both direct and regular mutual fund options are available. This implies that while investing in a mutual fund scheme, an investor has two choices for where to begin. The majority of investors choose the direct plan, which allows anybody to participate in a mutual fund. A mutual fund scheme's direct plans enable participants to invest in the scheme without the assistance of middlemen or distributors. Furthermore, the direct plan of a mutual fund scheme has various advantages over the normal plan.

Platforms for Investing in Direct Mutual Fund Plans

Today, it’s very easy to invest in direct mutual funds online through different trusted platforms. These options allow investors to choose and manage their investments without paying extra commission or relying on intermediaries. Here are the main ways to do it:

Asset Management Companies’ (AMC) official websites: You can visit the official site of any fund house, create an account, and directly invest in their mutual fund schemes.

Mutual fund registrars: Platforms like CAMS and KFintech let you access and manage direct plans from multiple fund houses in one place.

Dedicated online platforms: These are regulated platforms that enable investors in selecting and managing direct mutual fund investments based on their goals and risk levels.

Using these platforms makes it simple, transparent, and cost-effective to invest in direct mutual funds online anytime.

Types of Direct Mutual Funds

Following are some types of direct mutual funds.

Equity mutual funds	With these regular mutual funds, investments can be made in a portfolio of stocks, providing investors with growth potential.
Debt mutual funds	Investments are done in a wide variety of bonds to provide investors with better income and stability.
Money market mutual funds	To maintain a stable net asset value, mutual funds are invested in short-term debt securities.
Hybrid mutual funds	To achieve a balanced investment portfolio, mutual funds are invested in a combination of stocks, bonds and other assets.
Index mutual funds	These track the performance of a specific market index.
Themed/Sectoral mutual funds	Mutual fund investments are made in specific sectors or industries such as healthcare, technology, etc.

Features of Direct Funds

Direct mutual funds are gaining popularity with investors because they allow them to invest in the market directly. These are the key features of direct funds:

Investors can directly invest in the market without any intervention from an intermediary.

Investors can invest in direct funds both online and offline.

There is no commission to be paid to the mutual fund company. The fund house will not impose any distribution fee and will keep the expense ratio low.

There is no transaction fee for direct funds.

With lower expense ratios and no intermediary commissions eating into returns, direct funds often provide higher returns than regular funds.

Direct funds tend to offer greater transparency in terms of costs and performance.

Investors can choose from various direct funds across asset classes, including equity, debt, hybrid, and thematic funds, allowing them to build a diversified and tailored investment portfolio

Documents Required for Direct Mutual Fund Investing

The following are the most important papers to have when investing in a direct mutual fund:

PAN Number

Aadhaar Number

Having a bank account

KYC (Know Your Customer) documentation

Investing in Direct Mutual Fund Plan

Anyone can invest in direct mutual fund plans without involving a broker or agent. Since there are no intermediaries, investors need to handle all tasks on their own — such as completing KYC, submitting applications, managing portfolios, and adding nominations. This can be done both online and offline, though online investing is faster and more convenient.

Here’s a step-by-step guide to help you invest easily:

Step 1: Choose the mutual fund scheme and plan you want to invest in.

Step 2: Complete the KYC process if you haven’t done it before.

Step 3: Visit the official website of the chosen fund house or registrar (like CAMS or KFintech)

Step 4: Create an online account and fill in the investment details such as amount and plan type.

Step 5: Make the payment directly through net banking, UPI, or debit card.

Step 6: Once the transaction is complete, you’ll receive a confirmation and account statement from the fund house.

By following these simple steps, investors can easily invest in direct mutual fund plans from the comfort of their homes.

Best Direct Funds

Fund Name	Category	AUM ₹ crore	1-yr CAGR	5-yr CAGR	Min lump sum ₹
ICICI Prudential Infrastructure Fund - Direct Plan - Growth	Infrastructure	7,863	7.14%	38.63%	5,000
HDFC Infrastructure Fund - Direct Plan	Infrastructure	2,522	4.17%	36.51%	5,000
Aditya Birla Sun Life PSU Equity Fund	PSU Equity	5,533	4.46%	22.69%	500
SBI PSU Fund - Direct Plan - Growth	PSU Equity	5,521	6.90%	34.94%	5000

Advantages of Investing in Direct Funds

Investing in direct funds offers several advantages for investors compared to regular mutual. Here are five key benefits:

Lower Expense Ratios: Direct funds have lower expense ratios since they do not involve payment of commissions or distribution fees to intermediaries. As a result, more of your investment capital is working for you, potentially leading to higher returns over time.

Higher Returns: With lower expense ratios, direct funds often provide higher returns than regular mutual funds.

Transparency: Direct funds offer greater transparency in terms of costs and performance. Investors can readily access information about their holdings, transaction history, and the fund's portfolio composition, helping them make well-informed investment decisions.

Customisation: Investing in direct funds allows investors to tailor their portfolios to their specific investment objectives and risk tolerance. You have greater control over your investment choices and asset allocation.

Reduced Conflicts of Interest: Since there are no intermediaries, direct funds have fewer conflicts of interest. The investment decisions are based on the fund manager's expertise and the fund's stated objectives rather than incentives tied to selling specific products.

Disadvantages of Investing in Direct Funds

While investing in direct funds offers several advantages, it also comes with certain disadvantages that investors should consider:

Lack of Advisory Services: Direct funds do not provide the services of financial advisors or intermediaries who can offer personalised investment guidance. Investors must rely on their knowledge and research, which may lead to suboptimal investment decisions, especially for those with limited experience.

Higher Initial Research Requirement: Investing in direct funds necessitates a more hands-on approach. Investors need to conduct thorough research to select the right funds, monitor their performance, and make adjustments as needed. This can be time-consuming and may not suit individuals who prefer a more hands-off investment approach.

Risk of Poor Asset Allocation: Without professional guidance, investors may make incorrect asset allocation decisions, leading to an imbalanced portfolio that does not align with their financial goals and risk tolerance. A suboptimal asset allocation can result in lower returns and increased risk.

Limited Access to Expertise: Direct fund investors may not have access to the expertise of seasoned financial professionals and portfolio managers who manage regular mutual funds. This lack of expertise can impact investment decisions and asset selection.

Behavioural Biases: When managing their investments directly, investors may be susceptible to emotional biases such as fear and greed. Emotional decision-making can lead to impulsive actions and poor investment choices, potentially resulting in financial losses.

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