Managed by asset management companies (AMCs), mutual funds (MFs) channelise people\u2019s money into collective investments in equity, debt and other financial products. Based on the investment pattern, MFs may be broadly categorised into equity funds and debt funds. Although MF investments are subject to market risks, debt funds are much less risky than equity funds but give lower returns. Equity funds get directly affected by market fluctuations, while non-systemic or company-specific risks are minimised through well-diversified portfolios of equity funds. In fact, the fluctuations give the opportunity to get higher return in the long run, which otherwise would not be possible if the gain is risk-free and steady one. Investments in MFs may be done either through regular plans, where distributors get commission and thus have higher expense ratio or through direct plans, which is less expensive. The aim of direct schemes is to reduce cost and pass the additional benefits to investors, who are capable enough to take investment decisions and thus may approach the AMC directly to invest. However, unless very confident and have time to monitor their funds, such investors, who are generally high-value investors, also consult qualified and professional financial advisors before investing in direct plans. So, investments in direct plans may also be with the help of financial advisors or unassisted investments and hence there are also different modes of investing. MF platforms: Mutual fund platforms are the mediums through which investors may invest in direct plans. Registered financial advisors may also hire such platforms and manage investments for their clients by accessing their portfolios. So, apart from giving financial advice, advisors may also manage wealth of their clients, including mutual funds, through such platforms. However, flouting Sebi's advertisement code of not to promote MF schemes by projecting future returns, where the capital itself is under risk, some registered investment advisors (RIAs) are trying to entice individual or first-time investors to direct plans with promises of higher returns than regular plans. E-commerce sites: Sebi has given permission to some companies operating in e-commerce field and those offering mobile wallet services to deal in mutual funds. However, they are also not allowed to missell funds with promises of higher returns. As mobile wallet users maintain some balance in the wallet, they may invest with the click of some buttons. AMCs: An investor may approach an AMC or its RTA for investing in direct plans. Investors may also visit AMC sites to start investing online. As investments through e-commerce sites and AMCs may be done without taking any help from financial advisors, investors should know some fundamentals about investments. Steps to take before investing directly Identify financial goals: First identify your financial goals like buying a car and\/or house, child education, marriage, retirement, foreign tour etc. Cost to meet the goals: After identification, calculate individually how much money you need to meet all the goals, by taking into consideration present cost, time left to reach the goal and rate of inflation of each goal. How much to invest: Once you determine how much money you need and after how many years to meet the goals, you have to determine how much money you have to invest in lump sum and how much in regular intervals. For this you have to take into account the rate of returns on investments, time left to accumulate the money and resources you have to make the investments. Choosing the right asset class: The aim is to select a right asset class in which investments are to be made to achieve the financial targets on time with the help of available resources and by taking minimum risk. So, if you have substantial wealth, you might not need undue risk to achieve the goals. But in case you don't have much resources in hand, you may have to take the risky route to reach the goal. Analysing the investment product: In case you need to invest in risky products like equity MFs, where low, moderate and high-risk categories are available, you first have to chose the category. Once the category is identified, you have to choose a fund under the category by analysing the portfolio (i.e. how much of the fund money is going to which companies and present status as well as future prospect of the companies), performance and experience of the fund manager, risk factors like beta, standard deviation, Sharpe ratio, Treynor Ratio, Sortino ratio etc. before selecting a particular mutual fund to achieve a particular goal. You have to repeat the process to select a specific product, in which you have to make specific investments for a specific period to reach each specific financial goals. Maintaining financial discipline: Individuals are affected by traits like greed and fear. They enter equity market out of greed when the market is very high and existing investors have already earned high returns. And when the markets go for corrections, they withdraw money booking huge losses out of fear as the capital invested becomes negative and vow not to return again. So, you have to overcome such traits and determine when to invest in equity and through which route and have to continue till you reach your financial goals. If you think it's a tall task like climbing a tall coconut tree to fetch coconuts for cheap by not taking service of an expert coconut tree climber, rethink before going for a direct plan without help of a financial advisor. If you get panicked due to turmoil midway, not only you will miss the coconut, but would even lose appetite for it after falling on ground. Many people, who had burnt their fingers during 2008 market mayhem, are still fearful of equity investments. So, while the Sensex has gained CAGR of around 15 per cent in its 39 years of journey, many retail investors have suffered only losses. If you are a retail investor and can't invest in lakhs or crores or can't pay consultation fee to qualified and registered financial advisors, you may take help of an independent financial advisor (IFA) and invest in regular plan. Although regular plans have higher expense ratio, but the difference with that of direct plans are not significant and the difference has further narrowed down following Sebi crackdown on total expense ratio (TER) and malpractices of meeting expenses of direct plans from other heads than the permitted one. As per the TER sheet of one of the leading AMCs, average differences in expenses for most of the open-ended funds is just 0.1 per cent. Sebi in its recent circular has also abolished the upfront commission and allowed only trail commission. The trail commissions are given on fund value and hence would vary directly with the performance of a fund as well as market conditions. The aim of trail commission is that IFAs should continuously monitor performance of the funds they sold and guide investors to better performing funds to maximise the investors' as well as his gains, and hence investors would get active services of IFAs through the investment period.