Investing in mutual funds can be a great way to grow your money. If you are looking for higher returns and want to save on costs, direct mutual funds are the way to go.
In this guide, we will take you through the step-by-step process of investing in direct mutual funds.
What Are Direct Mutual Funds?
Direct mutual funds are a kind of mutual fund. In these funds, you invest directly with the fund house or the Asset Management Company (AMC).
This means you do not go through a mutual fund distributor. Because there is no middleman, the expense ratio is lower, and you save money. This can lead to higher returns in the long run.
Why Choose Direct Mutual Funds?
- Lower Costs: Direct plans have a lower expense ratio compared to regular mutual funds.
- Higher Returns: By saving on distributor commissions, you can earn better returns.
- Transparency: You deal directly with the AMC, making the process more transparent.
- Control: You are in charge of your investment decisions.
Steps to Invest in Direct Mutual Funds
Let’s walk through the steps to purchase direct mutual funds.
Step 1: Complete the KYC Process
The first step to invest in direct mutual funds is completing your KYC (Know Your Customer) process. Mandatory for all investors in India. Here is how you can do it:
- Visit the AMC website or a registrar and transfer agent like CAMS or KFintech.
- Fill out the KYC application form.
- Provide your PAN card, Aadhaar card, and other required documents.
- Submit a passport-sized photograph.
- You may need to verify your identity through an online or in-person process.
Once you receive KYC approval, you can start investing.
Step 2: Choose the Right Mutual Fund Scheme
The next step is to select a mutual fund scheme that suits your financial goals. Here are a few tips:
- Decide your investment goal: Are you investing for short-term or long-term goals?
- Check the risk level: Mutual fund plans come with different risk levels, such as low, medium, and high.
- Compare past performance: Check how the fund has done in the past. Keep in mind that past returns do not promise future returns.
- Read about the fund manager: A good fund manager can make a significant impact.
Step 3: Decide Between Lump Sum or SIP
You can invest in direct mutual funds in two ways:
- Lump Sum: A one-time investment.
- Systematic Investment Plan (SIP): Invest a fixed amount regularly, like monthly or quarterly.
Choose the method that aligns with your budget and goals.
Step 4: Visit the AMC Website or Use an Online Platform
To invest in direct mutual funds, you can:
- Go to the AMC website: Most fund houses have an easy-to-use online platform for direct plans.
- Use a registrar and transfer agent. Platforms like CAMS or KFintech let you invest in many mutual fund plans.
- Download mutual fund apps: Many apps offer easy access to direct mutual funds.
Step 5: Fill Out the Application Form
When you decide on a mutual fund scheme, fill out the application form carefully. You will need to provide details like:
- Your name
- PAN card number
- Bank account details
- Investment amount
You may also need to provide a cheque or demand draft for your first investment if you are not using online banking.
Step 6: Submit Your Investment
Once your application form is ready, submit it along with the required documents. If you’re investing online, the process is even simpler:
- Log in to the AMC website or the platform you are using.
- Select the mutual fund scheme and the plan type (direct plan).
- Enter the investment amount.
- Complete the payment using online banking, UPI, or a cheque.
Step 7: Receive Your Account Statement
After your investment is processed, you will receive an account statement from the fund house. This document confirms your investment. It includes details like the number of units given, NAV (Net Asset Value), and total investment value.
Things to Keep in Mind
- Understand the Expense Ratio: A lower expense ratio means higher savings.
- Check Fund House Credibility: Invest in mutual fund schemes from reputed fund houses.
- Track Your Investments: Regularly review your account statement to track your mutual fund investment performance.
- Keep Your Documents Ready: Always have your PAN card, Aadhaar card, and bank details handy.
Common Mistakes to Avoid
- Not Completing KYC: Ensure your KYC process is complete before investing.
- Ignoring Expense Ratio: A higher expense ratio can eat into your returns.
- Following Trends Blindly: Make investment decisions based on your goals, not market trends.
- Skipping Research: Always research the mutual fund plans before investing.
Investing in direct mutual funds is a smart way to grow your wealth while saving on costs. You can earn more money by working directly with the AMC.
You can also use trusted online platforms. This gives you better control over your investments. Follow the steps mentioned in this guide, and you will be well on your way to building a solid financial future.
Remember, every mutual fund investment should align with your goals. Whether you choose to invest in direct plans or explore other mutual fund schemes, the key is to start early and stay consistent.
Disclaimer: This article is intended for informational purposes only and is based on data collected from the internet. It’s always advisable to consult with a financial expert or advisor before making any investment decisions. Your financial future is important, and professional guidance can help ensure you make the best choices for your situation.