How can I invest in Mutual Funds directly?

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Mutual funds are one of the best investment options out there. But today in this article we will talk about one of the lesser known ways of investing in a mutual fund- A direct plan, only a number of people are aware of this.

What is a Mutual fund?
A mutual fund is one of the buzzing investment options. It can be basically understood as a fund, where money from different investors is pooled in together and then invested. There are 3 basic options of investment under mutual funds- equity, debt, and hybrid. Also, you have more options in these funds also, you can invest based on sectors, the market capitalization of companies, etc. These options make the mutual fund a preferred option from customers, also there are other added advantages such as low risk, professional management, and good returns.

What is a direct investment in a mutual fund?
Direct investment is also known as a Direct plan, under this plan you directly invest in the fund, through their website. Normally, when you invest in a mutual fund, you do it through a regular plan, under which your money is usually invested through a distributor of the fund, such as your broker. A direct plan is similar to buying a product directly, from a manufacturer instead of a distributor. The fund, portfolio, fund manager, and rest of things are similar between both the plans.

Difference between Direct Plan and a Regular Plan?
There is not much difference between both of them, except for the cost. When you invest through a direct fund, you have a lower expense ratio, as there is no distributor involved, you save the commission and others that you would incur in case you invested through a distributor. So, if you want to save money then you can go with Direct Plan. Also, the cost that is incurred in paying commission to the distributor is saved and added back to the returns that is why Direct plans have a higher NAV than Regular funds. But also, with cost-saving, direct funds require more knowledge and are better for DIY investors, if you are someone inexperienced then the direct plan isn’t recommended for you. If you have adequate knowledge and market experience and don’t require any advice then you can go for Direct Plan.

How can I invest in a mutual fund?
You can invest in a direct plan of the mutual fund using their website or via the online website of stock or MFU mutual fund utility or many other channels. You also have the option to do it using your bank’s website. But there are very few banks and financial intermediaries that provide this service. And make sure whenever you are filling out the form select the Direct Plan option.

Conclusion – A direct Plan is a great option for investment, but make sure you have adequate knowledge and experience before you start investing. Also I would help you save money and earn higher returns.

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