When you look to invest in mutual funds, you have two options available – Direct or Regular. When you invest in a Regular Fund, it implies that a distributor or a broker or a bank is involved, who gets commissions. This is reflected in the higher expense ratio of the regular option, leading to lower returns for you, when compared to the direct option. Hence you can earn a higher return on your investment by opting for Direct rather than Regular Mutual Funds. And for that, you should know whether you are investing in Direct or Regular mutual funds!
But first – we want to clarify the biggest myth – Most people think that if they are investing in mutual funds online, or via bank or via any fintech platform or even on the AMC website/app – they are investing in Direct Plans. Not necessarily!
We have listed down 10 simple ways to check if you have invested in a Regular or Direct Mutual Fund:
1. If you have invested in mutual funds through a distributor, broker or bank, then it is highly likely that you have invested in a Regular Mutual Fund.
Investing through online portals:
2. All online platforms do not necessarily offer Direct Mutual Funds. On the contrary, some of these platforms offer only Regular Mutual Funds. So don’t take it for granted that you are investing in Direct Mutual Funds simply because you did it online.
3. Investing through the AMC website/app does not mean that you are investing in a Direct Mutual Fund.
4. Direct funds have the word “Direct” in the scheme name. If you are investing through an online platform, you can easily check this. Some portals can use the abbreviation “Dir” to denote Direct Mutual Funds. If there is no mention of these words or there are words like “Regular” or “Reg”, then you are probably investing in a Regular Mutual Fund.
5. Expense ratio of Regular Mutual Funds is always greater than Direct Mutual Funds. Before investing you can check the expense ratios of both the plans and make sure that you are investing in the Direct plan.
Consolidated Account Statement (CAS):
Consolidated Account Statement gives you a complete summary of mutual funds that you have invested in till date. You can download your CAS online and carry out the following checks to find out if you invested in a Direct or Regular Mutual Fund.
6. If there is the word “Direct” in the name of the fund as highlighted below, then you have invested in a Direct Mutual Fund.
7. If there is “Regular” word in the name of the scheme, then you have invested in a Regular Mutual Fund.
If the fund name does not contain the words “Direct” or “Regular”, then once again you have invested in a Regular Mutual Fund.
8. In your CAS, there is a field called Advisor as highlighted below. If that field is filled with “ARN” followed by a number code, then it is definitely a Regular Mutual Fund.
9. In the same Advisor field if you find values like: Direct or 0000000000 or INA100009859, then it is a Direct Mutual Fund.
Communication from AMC:
10. One more way you can verify this is from the communication that the AMC sends you via email or SMS. Most of the AMCs mention the variant of the scheme that you invested in. If you cannot find the word “Direct” in either of these communications, then most probably you are investing in a Regular Mutual Fund.
After going through these checks, we are sure that you have found out whether your investments are in Regular or Direct Mutual Funds. There is a misconception that once you have invested in Regular Funds, you cannot change that decision. On the contrary, you can easily switch your investments from Regular to Direct Mutual Funds.
If you are new to the mutual fund space, make sure to consult a trusted financial advisor before making any investment decisions!
(By Ankit Fitkariwala, Chief General Manager (Advisory), Paytm Money)