Discounts are the flavor of the festive season. From shopping malls to your favorite e-commerce websites such as Flipkart, Myntra and Amazon, everyone is offering heavy discounts. You try to maximize your savings too. You look for the best deals, compare product prices across various online portals and search for discount coupons and cash back offers.
However, amid this heavy duty work, we sometimes miss out on some of the simplest and easiest deals available. These deals are right in front of us but we don’t take them.
Investment in Direct plans of mutual fund schemes is one such deal. You can save a lot of money over long term by investing in direct plan of mutual fund schemes. But not many investors are aware about direct plans of MF schemes.
What are Direct Plans of Mutual Fund Schemes?
In short, there are two ways of investing in mutual funds. One through an intermediary (regular plan) and one without involving intermediary (direct plan). Expectedly, since there is no intermediary involved in direct plans, there is no commission to be paid to the intermediary and that reflects in higher returns for direct plans. For more on direct plans and how these plans offer better returns, go through the following post.
Why you should invest in Direct Plans of Mutual Fund Schemes?
Isn’t that the definition of a discount? You get the same product at a lower price. Under direct plan of MF scheme, you invest in the same fund with the exactly same portfolio managed by the same manager (as in regular plan of a MF scheme). It is just that the return under the direct plan is higher than the regular plan. Since mutual funds are meant for long term investments, the difference in absolute return can run into lacs of rupees (because of compounding). Which online portal gives you such discount?
Must Read: Common doubts regarding Direct Plans of Mutual Fund Schemes
Best Money Saving Tip for 2016
Switching from regular plan to direct plan of MF schemes could be the best money saving tip for 2016 for many investors.
Must Read: Should you switch from Regular Plan to Direct Plans of Mutual Fund Schemes?
For new investors, they can begin investing in direct plans of mutual fund schemes. I am sure the cost saving over the long term will be far greater than the discounts you will get on e-commerce websites.
How to invest in Direct plans of Mutual Fund Schemes?
I have discussed in many posts how investments in direct plans are beneficial to investors. In this post, I will discuss various ways through which you can invest in direct plans of Mutual Funds schemes.
You can invest in direct plans through both physical (offline) and online modes. Let’s find out how.
How to invest in Direct Plans of Mutual Funds in Offline (Physical) Mode?
Not everyone is comfortable doing financial transactions online. If you feel the same, you can invest in direct plans in the following manner:
- Visit the nearest Mutual Fund Branch (AMC office): You can fill in the form for purchase starting/stopping a SIP or redemptions. The only problem with this approach is that you will have to visit the branch for very transaction.
Moreover, MF branch will allow transactions only in its schemes. For instance, you cannot go to HDFC MF branch to invest in ICICI Prudential Mutual Fund scheme. Hence, for every new AMC you want to invest with, you will have to visit a new branch.
- Visit the nearest office of R&T agencies such as CAMS and Karvy: CAMS and Karvy act as Registrar and Transfer agents for many mutual fund houses (AMCs). In a way, AMCs have outsourced their paperwork to these entities. You can even visit CAMS and Karvy branches in your city to invest in direct plans of MF schemes. CAMS and Karvy do not act as R&T agents for all the AMCs. You can only invest in funds serviced by them at their branches. Visit these links for the list of AMCs (MF houses) serviced by CAMS and Karvy.
- Visit MF Utility Point of Service: At MF Utility POS, you can invest in MF schemes from 25 participating AMCs (mutual fund houses). To start with, you will have to Common Account Number (CAN) registration from and submit at any point of service of MF Utility. You can go to the following link and follow the set of instructions. Once you have CAN, you are good to go. You can visit any MF Utility POS and fill transaction forms.
Typically, CAMS and Karvy act as Point of Service (POS) for MF Utility. You can visit these branches to invest through MF Utility. For complete list of points of service for MF Utility, you can visit this link. For more on MF Utility, do through the following post.
Must Read: MF Utility is a win-win for investors
If you are investing in offline mode (physical), remember to write Direct in front of the scheme name e.g. HDFC Balanced Fund-Direct Plan. This will avoid any kind of confusion.
How to invest in Direct Plans of Mutual Funds in Online Mode
- From Websites of respective AMCs: If you are KYC compliant, you can start investing right away. You need to have your net banking details ready. Visit the MF website and follow the instructions.
Must Read: Invest Online in Direct Plans of Mutual Fund Schemes
You would be KYC compliant if you are an existing investor. Even if you are not KYC compliant, you can get the KYC done at CAMS or Karvy branches or at nearest AMC branches. For new investors, some AMCs have even started offering e-KYC facility. Do note once you are KYC compliant, you don’t have to repeat the exercise with every AMC. To check whether you are KYC compliant, go to this link.
- Online investment in direct plans through MF Utility: MF Utility has started offering online investments in direct plans to retail investors from January 1, 2016. This is a HUGE development. From MF Utility, you can invest or transact in multiple MF schemes from a single interface. If you are already using MF Utility in offline mode or have Common Account Number (CAN), you can request MF Utility for online access. As of now, MF Utility is available free of cost to investors.
I had not yet opened account with MF Utility since the online investments in direct plans were not yet permitted. However, with online investment in direct plans now a reality, I plan open account with MF Utility (apply for CAN) in a few weeks.
- Websites of CAMS and Karvy: You can also go to websites of CAMS and Karvy, register with them and invest in direct plans of MF schemes serviced by them. So, you can go to CAMS website (or mobile App) or Karvy website. The limitation is that you can only invest in funds serviced by respective R&T agencies. Visit these links for the list of AMCs (MF houses) serviced by CAMS and Karvy.
- Several online portals are coming up that promise to allow investment in direct plans of MF schemes. Their business model and the level of fees charged are not yet clear. Since such portals have not yet been launched and I have no feedback about those portals, I am withholding names of those portals.
If you are investing in direct plans online, select Direct plan option. While selecting fund, select MF Scheme Name- Direct Plan e.g. HDFC Balanced Fund- Direct Plan.
How NOT to invest in Direct plans of Mutual Funds?
You will end up investing in regular plans of mutual fund schemes if you purchase mutual funds through:
- Through local Distributors: Local distributors acts as intermediary and get commission from the mutual fund houses. You will get invested in regular plan if you go through them.
- Through Banks: This is a very common misconception. If you think you will get invested in direct plan of a HDFC MF scheme if you invest from a HDFC bank branch, you are WRONG. HDFC Bank merely acts as intermediary (distributor) for HDFC AMC and gets commission just like a distributor does. Hence, if you have been investing in mutual fund schemes through bank branches, you need to rethink.
- Through online portals such as FundsIndia, Scripbox or ICICIDirect: Again, these portals acts as intermediary and are compensated my AMCs (mutual fund houses). If you are investing through these portals, you will end up investing in regular plans of MF schemes.
Please understand the local distributors and specific online portals are not evil. They offer you convenience and advice (in some cases) and deserve to be compensated for the same. With banks, I have certain reservations. In my opinion, banks are the worst places to seek financial advice.
PersonalFinancePlan Take
In my opinion, the convenience you get by investing in regular plans is not worth the price you are paying. Moreover, the process of investing in direct plans of Mutual Fund Schemes is quite simple.
With MF Utility permitting online transactions in direct plans, you can make investment in multiple MFs from a single interface.
You don’t have too many excuses left for not investing in direct plans of mutual fund schemes.
A Word of Caution: Though direct plans of MF schemes are low cost and offer better returns than regular plans, it does not mean mutual fund selection and investment discipline is not important.
Direct plans are the best suited to Do-it-yourself investors. Such investors can research and select based on their goals and investment horizon. This way, they can save on intermediary cost by investing in direct plans of mutual funds.
If you are not comfortable doing MF research on your own, you might be better off going through a local distributor for regular plans. He/she will help you select funds and make necessary adjustments to your portfolio when required.
Alternatively, you can seek assistance from a SEBI registered Investment Adviser. Such advisers can offer you investment advice for a fee and you can subsequently invest in direct plans of mutual fund schemes. The fee you pay to these advisers will be easily taken care of through cost savings from direct plans.
Disclosure: I am a SEBI Registered Investment Adviser. Hence, I have vested interest in recommending you services of a SEBI Registered Investment Adviser.
Image Credit: Kurt Bauschardt, 2012. The original image and information about usage rights can be downloaded from Flickr.
29 thoughts on “You can get discounts on Mutual Fund Investments too”
When one invests in Direct MFs through own bank account online – is that direct or regular plan. For eg. I have an account with HDFC and a MF account and a Demat account – the options all show up when I log into the account through my Cust ID. And I can directly opt for any shares or mfs through this. What happens in such a scenario ?
That way you are investing in regular plans. Banks are acting as intermediary or distributors.
Similarly, when you visit HDFC Bank and purchase HDFC MF schemes from there, you are investing in regular plans.
Hi Deepesh,
Can u please suggest any good website for creating & updating of my Mutual fund portfolio or overall portfolio ?
I found one in Valueresearch.com – not sure how good it is.
Are there other better options?
does uploading the portfolio details help an individual in the long run? what r the advantages/disadvantages?
Awaiting for your valuable suggestions
Hi Biswadeep,
I don’t think creating portfolio on a website helps much. It is mere presentation of information.
You can go to CAMS website and download statements from there. It will give you details about you holdings across industry.
However, if you are keen on this, you can do with any website.There is no way they can harm you.
There are many that offer this facility including ValueResearch and Moneycontrol. Pick up anyone.
Thank u so much.
Can u please tell me r Diversified MF & Multi-cap MF same ? R they just same category with different names ?
Moreover why some MF schemes (e.g Kotak Select Focus, SBI Bluechip Fund,etc)
are classified under
the Large cap category of Moneycontrol,Morningstar while the same r under Multicap category in ValueResearch ?
This is a bit confusing …are there any classification parameters?
You are welcome.
Diversified funds are those that invests in companies across sectors and not just limited to one sector (say banking, pharma, FMCG).
There is another classification based on market cap of companies, large cap funds investing large cap companies, mid and small cap funds invest primarily in mid and small cap companies. Multi-cap funds invest in companies across market capitalization. Such funds will invest in large cap, mid cap and small cap firm based on their expectations.
Now what constitutes a large cap company or a mid cap company is subjective. There is no clear guideline. That’s why you will find difference between Value Research and MorningStar. Unfortunately, not much can be done about it. Sometimes, funds can also deviate from their mandate a bit which makes it even more subjective.
What you can do is that you can look at the fund benchmark (Nifty, Sensex, Nifty Midcap, Bse 100, BSE 200 etc) and the portfolio of the fund together to make an assessment whether the fund is truly large cap or truly midcap or multi-cap.
Your explanations are very well described…thanks again.
Experts like you suggest us to allocate the total equity MF exposure in different portions in Large cap, Mid&Small cap, Multi-cap etc.
Till yesterday i knew that i am investing in a large cap MF via SBI Bluechip (SIP) according to Morningstar & Moneycontrol only to be told by ValueResearch that i am actually investing in a Multi-cap MF…so now it seems i don’t hav any exposure to Large-cap at all…this is where my confusion started..
Sometimes, too much analysis can confuse you. 🙂
Don’t worry much.
I see a lot of clients with their entire portfolio in mid and small cap funds. This is because in good times, such funds tend to outperform large cap funds. Such one-sided mix should be avoided.
Otherwise, a bit here and there is fine.
Hi Deepesh,
Is there any way to find out whether a particular scheme of an AMC is still open for subscription? I registered with an AMC on their website only to find out that they don’t offer the direct route for their liquid plans.
Hi,
Most will be open for subscription. Only closed ended funds are not open for subscription all year round.
This is something I am hearing for the first time. This is against SEBI norms. AMC has to offer direct plan for every scheme.
Can you please point out the exact scheme name?
It might be a technical issue or perhaps you selected an incorrect option.
For instance, if you select to invest under distributor name, then you won’t be able to invest in direct plan.
Can you please recheck?
I’ve checked it many times over. I log in and go to invest. Then there’ll be two options – direct and distributor (where I have to enter some ID no for the distributor (forgot what it’s called). When I choose the direct option, it’ll ask me to confirm that I’m not a US-based investor & accept the T&Cs. Then it’ll take me to a page giving me options to invest only in equity, debt and balanced. When I check with the website’s chat box, they don’t respond after reading my query.
I don’t want to go another website and/or open an MFutility account only to find out that all liquid plans are only to be handled by distributors.
Which AMC are you talking about? Drop them an e-mail about the issue you are facing. Must be a technical glitch.
I have invested in direct plans of liquid funds through MF Utility.
Hi Deepesh,
the Thread is very informative and precise, its just rapid education for a initial investor.
I am planning for my tax savings for this year, i know its kinda late by i am thinking of lumpsum droops in 3 MF (ELSS) .
DSP BR Tax Saver, Birla Sunlife Tax Saver & Tata India tax Saver, i came up with these because a quick study of the companies they invest i feel it covers all well paced sectors, well paced and resilient companies.
Based on the performance for next 4 months i may convert into SIP for next year tax planning (hope i can start or stop SIP or change SIP value at anytime in online ) or may switch fund.( i am going to do online direct purchase as i already have small value liquid funds in these fund house, started it with a brocker when i was getting educated in investing.
What do you think about this?
Thanks Sandeep for your inputs.
You can start or stop SIPs at any time.
Thanks a lot sir for such wonderful and useful information
Can you please tell us pros and cons of investing in direct funds through individual AMC website v/s Mutual fund utility.
If i am registering for SIP through individual AMC website then will the units be seen in mutual fund utility account?
Is investing through investing through individual AMC website more safe and cheaper and faster(in terms of units allotment)?
Hi Prakash,
There are no pros and cons. It is more about what you are comfortable.
MFU provides consolidated view and single interface to transact in schemes from multiple AMCs. MFU does not provide any additional info about returns, gain etc. So, very limited information.
AMC portals are likely to be quite rich in terms of info. If you are comfortable with login credentials of 2-3 websites, you can invest directly from AMC websites too.
Both are free of cost.
Yes, the units purchased through SIP set up on AMC websites will be visible on MFU portal.Such AMC has to be onboard MFU.
Thanks for reply sir.
1) If using MFU, where to get returns info, capital gain?
2) If doing multiple SIPS in one transaction through MFU(as permitted through website) suppose we want to cancel one SIP, does it allow to cancel 1 SIP or we have to cancel entire transaction?
3) If doing multiple SIPS (say, hdfc fund on 5th, tata fund on 10th, icici fund on 20th of every month of 5000 rupees each) in one transaction through MFU, 15000 will be debited from my account on 5th ?? or 5000 will be debited on 5th ??
4) After registration of Payezz form, if SIP is scheduled on 5th date of month, when units be alloted to me?? and when units alloted when if pay lumpsum through Payezz?
5) Recently came across very useful site camsonline and found user interface better with more details like returns and gain although few AMCS are not listed. What are your views about it comparing to MFU?
Thanks sir
Dear Prakash.
1. You can get from AMC or CAMS/Karvy websites.
2. You can cancel individual SIPs.
3. debits on respective SIP dates
4. in a few days. You will mostly get same day NAV (expect for liquid funds or purchase amount > 2 lacs)
5. No view. You can use CAMSOnline too if you are comfortable.
Dear sir,
Suppose we switch from regular to direct plans after 1 year(in equity based fund), does timing of market make a difference to get lower NAV in new direct plan
If you are switching (sell and purchase at one go), then no.
Please guide me whether to invest through individual AMC websites(i dont have any problem in remembering passwords of multiple websites of different AMC’s) or MFU. Please dont say whichever comfortable.(I want to do sip for 7-10 years)
Raghvendra,
There is no black and white answer to this question.
You can invest through respective AMC websites too. Data presentation is certainly better on AMC websites than on MFU.
But yes, MFU provides greater convenience of transacting in schemes from different AMCs from a single interface.
Personally, I use MFU.
Please understand this is not a recommendation to use MFU.
Dear sir,
While purchasing through icicidirect using 3 in 1 account, we dont pay any banking transaction charges(although purchase regular plans), but when purchasing through direct AMC’s/ MFU we have to pay banking transaction charges.
How do you look at this aspect?
Dear Raghavendra,
You don’t have to pay any charges transacting in direct plans from AMC website/MFU.
I have never paid a single penny.
sir, i am asking about banking charges?
Suppose i pay for birla sunlife frontline equity fund using my icici bank acount by neft/rtgs…wont icici bank charge me that nominal charges for it?
I reiterate there is no extra charge for investing in direct plans. NEFT or RTGS charges, if any, will be there for investment in regular plans too. You can make payment through Net banking, which is free.
There may be minor one-time charge for registering NACH mandate if you want to set up SIP. Btw, not all banks levy such charge.
I am investing in direct plans for quite sometime. Never paid a single extra penny.
I invested 3 lakh in DSP BlackRock Growth – Regular plan. Before a year got over, o I switched to Direct of the same MF plan via Mfutility
What taxes will I have to pay because of this switch?
You will have to incur exit load.
Additionally, you will have to pay 15% tax on capital gains.
Please advise sir