Direct Mutual funds are for sure one of the best investment options out there, and more and more people are investing in mutual funds. Investors usually tend to use apps like Groww or Upstox or their broker. But today we will talk about a lesser-known way of investing in a mutual fund a Direct Plan which we will discuss in this article.
Table Of Contents
1. What is a Mutual Fund?
2. What is a Direct investment in a Mutual Fund
3. Are Direct Mutual Funds safe?
4. Advantages of Direct Plan
5. Disadvantages of Direct Plan
6. Conclusion
What is a Mutual fund?
Mutual fund means that when multiple people come together to invest. There money is taken and invested in multiple assets such as stocks, bonds and securities.
Mutual funds are diversified as when you put your money in a mutual fund then your money is invested in multiple assets. Due to this diversification the risk of your money decreases.
What is a direct investment in a mutual fund?
When you directly invest in a mutual fund then it is known as Direct plan. In Direct plan you invest in mutual funds through companies website. When you are a beginner and you have no or low knowledge about direct plan then you invest through regular plan.
In a regular plan you invest in a mutual fund through a distributor of the fund. In a direct plan it is like investing on your own. Rest of the things are similar to a regular plan.
Are Direct Mutual Funds safe?
Yes, Direct Mutual Funds are safe, as it’s the same fund just the investment procedure is different. Many companies offer investment in the Direct Mutual Fund. And almost all of these are registered with SEBI, thus they are regulated and governed by SEBI, making them safe. So, any risk of financial fraud is minimal and one doesn’t have to worry about it.
You always have open access to the funding house, you can always check your investment and see how the fund is performing, also if there is no lock-in period then you can withdraw your fund. So you don’t need to worry about the safety of these funds, but make sure you invest with complete research.
After all, no investment is risk free as they may give higher return than your usual investment option. It is sure that no one runs away with your money as these companies are SEBI registered and they have a fund manager to manage the funds portfolio.
Direct plans are more transparent as you can directly invest through companies’ websites or apps. Directly investing in mutual funds leads to knowledge of the investor as you have no one to suggest to you what to buy or not. It is all dependent on the investor which fund he/she is choosing according to their research.
Advantages of Direct Plan
1. The main advantage of direct mutual funds is that the expense ratio is less than regular plans.
2. As there is no middle man or distributor so you have more transparency over the mutual fund.
3. As there is no distributor you don’t have to pay any commission.
Disadvantages of Direct Plan
1. Investing directly in a mutual fund requires knowledge about the mutual funds, stocks and bonds.
2. It requires your own research about the funds as there is no distributor involved.
3. Beginners may face issues in choosing a mutual fund as there are some mutual funds which are highly volatile.
Conclusion
Direct Mutual Fund platforms are generally considered safe for investing as they are regulated by SEBI and follow strict rules and regulations to protect the interests of investors. However, it’s important to research the platform and the fund options before investing and to monitor your investments regularly.
Diversifying your portfolio and investing for the long-term can also help reduce risk. It’s also a good idea to consult a financial advisor before investing in mutual funds to understand the risks and benefits involved. Overall, Direct Mutual Fund platforms can be a safe and effective way to invest, but it’s important to take necessary precautions and do your due diligence.