How to invest in direct mutual funds?

Investing in mutual funds is considered a good investment option for wealth creation. While investing in mutual funds, you have two options: direct mutual fund and regular mutual fund. The basic difference between them is the involvement of mutual fund agents/distributors which impacts the expense ratio. Direct mutual funds have a lower expense ratio as compared to regular mutual funds. Let us read in detail about how to invest in direct mutual funds, the advantages of investing in direct mutual funds, and the documents required for investing in direct mutual funds. 

Different ways to invest in direct mutual funds Online?

Once you gather all the required documents for investing in direct mutual funds. You can choose to invest through the AMC website or through the registrar and transfer agent. Let us understand these two available options in detail.

Investment through the AMC website

You can invest in direct mutual funds through the AMC website by choosing the mutual fund scheme. To invest in direct mutual fund through the AMC website, follow the below steps:

Step 1: Open an account with the AMC

The registration process may differ from one AMC to another. You must set up your account with an AMC or mutual fund house as per the instructions provided.

Step 2: Select the investment scheme

Select the investment scheme that you want to invest in – Dividend and Growth. In case you choose a dividend, you will get returns periodically. If you want to reinvest your returns to increase the investment value over time, you can choose ‘Growth’.

Step 3: Select investment details

Depending on your requirement, you can choose investment details such as choosing between a systematic investment plan or lump sum, demat or no demat account, mention whether a registered investment adviser (RIA) is assisting you or not – provide the RIA code (if applicable), determine mode of payment, and confirm the bank detail – bank name, account number, IFSC code, and account type.

Step 4: Verification

Once you confirm all the provided information, you will receive an OTP on your registered mobile number or email ID.

Step 5: Payment Mode

Make the payment via the select mode of payment. Once you make the payment, you will receive confirmation on your email ID or mobile number.

Investment through a registrar and transfer agent

Step 1: Select an RTA

Select Registrar and Transfer Agent authorized by the Securities and Exchange Board of India (SEBI). Some of the famous RTAs include Karvy, CAMS, and Sundaram BNP Paribas. These RTA are responsible for managing investor communications, maintaining records, and processing transactions.

Step 2: KYC Process

Complete your KYC process by submitting your documents such as PAN card, identity proof, and address proof.

Step 3: Set up an account 

Set up an account by filling in your personal details required, mutual fund scheme, and investment preference, and submit the application form online or physically depending on the RTA’s offerings.

Step 4: Select the Mutual Fund scheme

Based on risk profile, performance history, and fund objectives, select your mutual fund. Once done, choose between a Dividend or Growth plan depending on your financial plan.

Step 5: Select the investment method

You can choose between a Lump Sum for a one-time large investment or a Systematic Investment Plan (SIP) for periodic contributions.

Step 6: Verification

Upon submitting documents and investment details, you will get a verification by email or SMS.

Step 7: Payment

Make payment via your selected mode of payment. Once you make payment, you will get a confirmation.

How to Invest in Direct Mutual Funds Offline?

If you are not comfortable with investing in direct mutual funds online. You can choose to invest offline by following the below process:  

• Step 1:  Select AMC
  Choose Asset Management Company and visit the nearest office of the selected AMC.
• Step 2: KYC Process
  You need to complete the KYC (Know Your Customer) process by visiting the centre. You can get the KYC documents at the AMC branch.
• Step 3: Document submission
  For in-person verification, you need to carry documents such as a copy of a self-attested PAN, copy of self-attested proof, and submit Common application form or SIP form. If you choose SIP, you need to fill out a NACH Mandate (National Automated Clearing House) to auto-deduct the SIP amount from your linked bank account.
• Step 4:  Make Payment
  You must submit a cheque or demand draft in the name of AMC of your desired investment amount.

Please note that when you choose to invest in a direct mutual fund offline, you need to physically visit the branch for any procedure.

Advantages of investing in direct mutual funds

Investing in direct mutual funds offers few advantages. Below are a few of them:

• Options: There are various mutual fund schemes available with online direct mutual funds as compared to offline mode. Offline direct mutual funds offer limited options. With online direct mutual funds, you can choose investment options depending on your financial planning.
• Efficient: It is considered as efficient to invest in direct mutual fund online as it is less time-consuming.
• Convenient: investing in a direct mutual fund is convenient as once you update KYC details, you can invest in multiple Direct Mutual Fund schemes across different platforms.
• Easy process: Once you register with AMC, you can invest in any mutual fund scheme at any time in the future without repeating the registration process.

Documents required for investing in direct mutual funds

While investing in a direct mutual fund, you need to submit a few documents such as identity proof – aadhaar card, Voter ID, Passport or driving licence, PAN card, address proof, and passport-size photo.