Direct mutual funds have become increasingly popular in India due to their cost-effectiveness and potential for higher returns over regular mutual funds. A direct mutual fund plan allows investors to purchase directly from the fund house, bypassing intermediaries like agents or brokers. This article explores where to buy direct mutual funds in India, how the process works, and what investors should consider before choosing a platform.
Understanding Direct Mutual Funds and Their Benefits
What Are Direct Mutual Funds?
A direct mutual fund is a type of mutual fund investment in which you invest directly with the Asset Management Company (AMC) rather than through an intermediary. Unlike regular funds, direct mutual funds do not involve any distributor or agent commission, meaning lower expenses and the potential for higher returns.
Why Choose Direct Mutual Funds?
One of the primary reasons investors prefer direct mutual funds is the cost savings associated with lower expense ratios. These savings compound over time, leading to higher long-term returns compared to regular mutual funds. Additionally, direct mutual funds provide investors with more control, as they directly interact with the AMC, gaining better access to information and transparency about their investments.
Platforms to Buy Direct Mutual Funds in India
Asset Management Company (AMC) Websites
One of the most straightforward ways to invest in direct mutual funds is through the websites of AMCs themselves. Most major AMCs in India, such as HDFC, ICICI, SBI, and Nippon, offer the option to buy direct mutual funds on their official websites.
How to Invest through AMC Websites
To invest through an AMC’s website, you need to register as a new investor if you don’t already have an account. After completing KYC (Know Your Customer) verification, you can browse through the available mutual fund schemes and choose the direct plan you wish to invest in. Some AMCs offer easy SIP (Systematic Investment Plan) setup options, allowing you to make automatic investments regularly. However, managing investments through multiple AMCs might become complex if you have funds across different fund houses.
RTAs (Registrar and Transfer Agents)
Registrars and Transfer Agents (RTAs) like CAMS (Computer Age Management Services) and KFintech provide a platform for investing in direct mutual funds from various AMCs. These platforms streamline the investment process and allow investors to manage multiple AMC accounts in one place.
Using CAMS and KFintech for Direct Investments
By registering on either CAMS or KFintech, investors can access and invest in direct plans across a variety of AMCs without visiting individual AMC websites. Both platforms also offer the ability to track and manage your portfolio, set up SIPs, and review performance data. For investors with holdings in multiple AMCs, using RTAs is an efficient way to streamline the management of their investments.
Online Investment Platforms
Online investment platforms, often called “Direct Mutual Fund Platforms,” specialize in providing access to direct mutual funds and have become very popular among tech-savvy investors. Some prominent platforms include:
- Groww
- ET Money
- Kuvera
- Paytm Money
- Zerodha Coin
These platforms allow investors to browse, compare, and invest in direct mutual funds from various AMCs in a single interface. They are especially useful for beginners due to their user-friendly designs and additional educational resources.
How to Use Online Platforms for Direct Investments
To begin investing with an online platform, investors need to download the app or sign up through the website, complete KYC verification, and link their bank account. Once set up, they can browse and select direct mutual fund schemes from different AMCs. Most platforms also allow easy tracking of fund performance, setting of SIPs, and portfolio rebalancing options. Some platforms, like Zerodha Coin, require a nominal fee for their services, while others are entirely free.
Banks and Financial Institutions
Many banks offer investment platforms that allow you to invest in direct mutual funds through their online banking portals. Banks like SBI, HDFC, and ICICI have online investment sections where customers can select and invest in direct plans.
Advantages of Using Bank Platforms
Investing through your bank offers added convenience as it links directly to your bank account, making fund transfers seamless. However, the range of funds may be more limited, and banks may have a slight preference for their own AMC’s products.
Key Considerations When Choosing a Platform
Expense Ratios and Other Fees
Direct mutual funds inherently have lower expense ratios compared to regular funds, but some platforms may charge a nominal fee for added convenience, such as tracking tools or tax-saving services. Before choosing a platform, it is essential to check if there are any hidden charges or subscription fees.
User Experience and Ease of Use
Different platforms have varying user experiences. New investors may benefit from user-friendly apps like Groww or Kuvera, which are straightforward and offer educational resources. Experienced investors might prefer Zerodha Coin, which provides advanced tools and detailed data analysis.
Access to Fund Information and Research
Some platforms offer in-depth research and comparisons to help investors make informed decisions. Platforms like ET Money provide detailed insights, comparisons, and reviews of mutual funds, which can help investors evaluate performance metrics, such as past returns, risk levels, and asset allocation.
Additional Features and Tools
Many online platforms offer additional features that help streamline the investment experience. For example, Kuvera provides tax planning, and ET Money includes goal-based investing options. Tools like SIP calculators, goal planners, and portfolio tracking can be beneficial, especially for investors managing multiple funds.
Steps to Start Investing in Direct Mutual Funds
Step 1: Complete KYC Verification
Before investing, you must complete the KYC verification process, which is mandatory in India. Most platforms offer e-KYC (electronic KYC) for quick and easy verification. You will need basic identification documents, such as your Aadhaar card, PAN card, and sometimes a recent photograph.
Step 2: Choose Your Investment Platform
Decide whether you want to invest directly through AMC websites, use an RTA, or opt for an online investment platform. The choice of platform will depend on your preferences for ease of use, range of features, and investment management.
Step 3: Research and Choose Funds
Consider your financial goals, risk tolerance, and investment horizon. Using the platform’s research tools, you can review the historical performance, risk levels, and asset allocation of various mutual funds. It’s crucial to compare options and select funds that align with your long-term objectives.
Step 4: Start Investing
Once you’ve chosen your funds, you can initiate an investment by setting up either a lump-sum investment or a Systematic Investment Plan (SIP). Many investors prefer SIPs because they automate contributions, promote disciplined investing, and help average out the cost over time.
Step 5: Track and Rebalance Your Portfolio
Investing is a continuous process, and monitoring your investments is essential. Most platforms offer portfolio tracking tools, allowing you to view returns, performance, and overall portfolio balance. Regularly reviewing and rebalancing your portfolio ensures that it remains aligned with your goals and risk tolerance.
Pros and Cons of Each Platform Type
AMC Websites
Pros: Direct, simple to use, no middlemen, potentially lower fees. Cons: Limited to a single AMC, more effort required to manage multiple funds.
RTAs (CAMS and KFintech)
Pros: Access to multiple AMCs, central portfolio management, reliable customer support. Cons: May lack advanced tools or additional features found on dedicated platforms.
Online Platforms (Groww, Kuvera, ET Money, etc.)
Pros: User-friendly, access to multiple AMCs, comprehensive features, tracking tools. Cons: Some platforms may charge small fees; some investors may prefer simpler interfaces.
Bank Platforms
Pros: Direct link with bank accounts, easy transactions. Cons: May have limited fund selection, higher preference for their AMC products.
Conclusion
Choosing the right platform to invest in direct mutual funds in India depends on your preferences, level of experience, and specific investment needs. Whether you opt for an AMC’s website, a third-party online platform, or an RTA, each choice offers unique benefits. Investors should carefully consider factors like fees, ease of use, access to research, and added features.
Investing in direct mutual funds is an effective way to grow wealth over the long term, especially when managed through a user-friendly and reliable platform. The key to successful investing is to stay informed, regularly monitor your investments, and remain consistent in your contributions.
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