What is direct mutual fund plan?- We all know about Mutual funds.
But there are mainly two types of plans in mutual funds.
1.DIRECT MUTUAL FUND PLAN.
2.REGULAR MUTUAL FUND PLAN.
But we will mainly discuss direct mutual funds today.
If you want to invest your money in mutual funds you should know about these facts.
Otherwise, you will be at loss. This knowledge can help you to save a lot of money.
So, here we will discuss on-
- What is a Direct Mutual Fund plan?
- Direct plan vs Regular plan.
- How to invest in?
- The Advantage of a Direct Mutual Fund plan.
- The Disadvantage of a Direct Mutual Fund plan.
- My opinion.
Let’s discuss all the points one by one.
What is Direct Mutual Fund Plan?–
Until 2013, we had only a Regular plan as an option to invest in Mutual Funds.
That means if you want to invest in mutual funds, you have to invest through a Regular plan.
Or you can say that everyone had to invest through an agent, bank, or distributor.
It’s just like today, if we have to invest in stocks then we have to invest through a broker.
We can’t buy the stocks directly from the Stock Exchange.
Now the question is- Why it was so?
Because until then, the online option to buy mutual funds was not very good, also not everyone had a smartphone, and the internet was also not so popular.
So at that time, if you wanted to invest in a mutual fund, you had to spend a lot of time and do a lot of paperwork.
So the distributor or the agent would go to the Mutual fund office, your bank E.T.C to do all the works on behalf of you.
And for that, they used to charge a good amount for this.
But they wouldn’t take it directly from an investor.
Like at that time, if you are investing 100 rupees then 98 rupees will be invested in the mutual funds.
Of the remaining two rupees one is the mutual fund company’s commission and one is the broker’s commission.
Here the mutual fund company would pay the commission of the broker from your invested money.
After 2013, rules and regulations have changed a lot.
The Regulator Authority decided that now one can invest in mutual funds directly.
Now, it was not mandatory to invest in mutual funds through distributors or brokers.
So they launched a Direct plan.
If anyone invests through the direct plan then out of 100 rupees 99 rupees of him/her will be invested in mutual funds.
The remaining one is the mutual fund company’s commission.
Here you do not have to pay the broker’s commission that is why it is profitable for you.
Now you may think that one percent is a very small amount.
But if you invest in long-term ( that you should ) then you can save a lot of money.
Just remember that Direct Plans must be profitable for you always.
Direct plan vs Regular plan–
|Direct plan||Regular plan|
|1.Here you can invest directly.||1. Here you have to invest through a broker, distributor, bank E.T.C.|
|2.It is profitable for you. Because the expense ratio is low.||2. The expense ratio is higher than the Direct Fund.|
|3.It is very easy.||3. Little bit of time taking.|
These are the main difference between a direct mutual fund plan and a regular direct fund plan.
How to invest in?-
There are two ways.
Like if you want to invest in HDFC mutual fund then you can visit its website and can start investing.
But it has an imperfection.
On the HDFC mutual fund website, you can only see HDFC mutual funds and can invest in them only.
So if you want to invest in many mutual funds you need to visit their website to invest in.
Also, you can’t track these mutual fund’s performance altogether.
The second one is- Online mutual funds platforms.
Now there are many websites or apps that you can visit and invest in Direct Mutual Fund without any fees.
Here you can invest in any mutual fund.
It has two benefits.
The first one is- You can track all your mutual fund’s performance on a single website or app.
The second one is– You can find all company’s mutual fund schemes on a single website or app.
Advantage of Direct Mutual Fund plan–
Investing in mutual funds can be an advantage for us.
Just we need to choose the right scheme and need to invest for a long time.
Here Mutual fund’s plans are also very important.
Because we know that we will get some advantages if we choose a direct mutual fund plan.
So the first advantage is-
- You can start investing at home.
You don’t need to give your documents to anyone or don’t need to visit anywhere.
If you tell any broker person about your investment amount and you provide your documents ( which you have to do if you want to invest through a broker ) somewhere you will lose your privacy as well as it will take time.
- As you are investing directly so you don’t need to pay any commission to the broker.
Your maximum amount will be invested in the scheme.
- As you are investing Directly, it will take less time.
Disadvantages of Direct mutual fund plan–
As we discussed before it is very easy as well as the expense ratio is lower than the regular funds so in my opinion there are no disadvantages of a direct mutual fund plan.
It has many advantages in my opinion. As discussed before you can save a lot of money because its expense ratio is very low.
My opinion on Direct Mutual Fund plan-
First of all, you have to start investing if you want to create wealth in the near future.
Without investing you can’t be rich. You can invest anywhere you want.
But before investing you should know about the scheme or fund you are investing in.
It’s the only way to create wealth.
Whenever your income is increasing try to increase your investment.
That’s the only thing that I want you should start as soon as possible.
Now if we talk about a Direct mutual fund plan and a regular mutual fund plan, then I will always go with a Direct mutual fund.
I think I can make you guys understand that why I am choosing this option in this article.
Always choose a direct plan when you are investing in mutual funds.
It will take less time as well as you can earn more than a regular fund.
Which is a better direct or regular mutual fund?
Surely a direct mutual fund plan will be better than a regular plan. Because-
1.It is time-saving.
2.Lower expense ratio.
3.Easy to start.
What is the difference between a direct plan and a regular plan in MF?
Direct plan –
1. Here you can invest directly.
2. It is profitable for you. Because the expense ratio is low.
3. It is very easy.
1. Here you have to invest through a broker, distributor, bank E.T.C.
2. The expense ratio is higher than the Direct Fund.
3. Little bit of time taking.
Why is Direct plan NAV higher?
If you deduct a higher expense ratio the NAV of the will also reduce.
As you don’t need to pay any commission to the broker so the expense ratio is lower than the regular plans.
That is why the direct mutual fund would report NAV.
How do you know if a mutual fund is direct or regular?
If you follow an app like GROW you can search for direct plans. Like if you want to invest in HDFC mutual fund ( direct plan) then you can search “HDFC mutual fund direct plan”.
As well in your CAS, if the ADVISOR field is filled with “ARN” followed by a number code then it is a regular plan.
In the case of a direct plan, you can find- DIRECT/INA100009859/0000000000/ in the same Advisor field.
Can we convert the regular mutual funds to direct?
No. You need to redeem that fund and have to start investing in a direct plan.
Does NAV change daily?
Yes. The mutual fund refreshes the NAV at the end of each day. As the SEBI permits the mutual funds to update their NAV every day by 9 p.m.