Mutual Fund Investment: How to invest in a direct plan of MF?

By: | Updated: June 15, 2018 5:39 PM

A mutual fund is a service provided by a fund management company. Investors pay for the service deducted from the investment amount. Mutual fund comes in two plans: regular plan and direct plan. For investors with knowledge of the fund direct plan is an ideal way to go as it involves lower expense ratio.

Systematic Investment Plan, STP, Systematic Transfer Plan, DTP, STP investments, SIP investments in India, STP investments, benefits of STPs, STPs in IndiaThe expense ratio is lower for a direct plan of a mutual fund. However, owing to lack-of-awareness investors are dissuaded to invest directly in the fund. Investing in a direct plan seems tedious at first but, it ends up saving the commission otherwise paid to the fund distributors.

A mutual fund is a service provided by a fund management company. Investors pay for the service deducted from the investment amount. An expense amount charged by the fund company is similar for a single fund. However, the expense ratio is lower for a direct plan as it is sold directly by fund companies to the investors. The expense ratio is a measure of what it costs an investment company to operate a mutual fund. 

Everyone is eligible to invest in a direct plan of a mutual fund scheme. However, an investor must understand his/her risk appetite and financial goals in order to invest in a direct plan without needing a help from a distributor/adviser. 

ALSO READ: Mutual Fund Direct Plan and Regular Plan; which is suitable for you?  

There are various ways of investing in a direct plan.The easiest way to invest in a direct plan is through online portals. The various online portals for investing in a direct plan includes transaction portal on the mutual fund website, transaction portals hosted by the registrar and transfer agents of the mutual funds, online direct investment portals and mutual funds utilities platforms. An investor is required to give log in details and password multiple times while investing through the mutual fund websites. Also, mutual fund companies don’t provide any recommendations on the choice of the investment. An investor is required to mail in a form to set up a common account number for all mutual funds. An investor doesn’t get any investing recommendations on a mutual fund utility as this facility is set up by mutual fund companies.

The prerequisites for investing in a direct plan

1) The investor should have a PAN (unless exempt), Aadhaar number and bank account details along with the Magnetic Ink Character Recognition(MICR) and Indian Financial System Code (IFSC) details.

2) KYC ( know your client) complaint. It is in compliance with the SEBI norms in accordance with the Prevention of Money Laundering Act, 2002. The KYC process is investor-friendly and runs like a common thread across various SEBI-regulated intermediaries in the securities market like mutual funds, portfolio managers, venture capital funds, depository participants etc. An investor requires a recent passport size photograph, a proof of identity and a proof of address which should be self-attested, along with the originals for verification.

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