You are thinking of investing in direct mutual funds. Here is the process and different ways to invest in Direct mutual funds. You can invest in direct mutual funds online and also offline. Keep reading to know how.
Investments into mutual funds are gaining traction among people. And, since the introduction of mutual funds in India in 1963, the industry has covered many miles and now it is the most structured and well-diversified investment destination in India. The Indian Mutual Fund industry (MFI) comprising 42 mutual fund companies manages a total asset of Rs. 20 lakh crore. The MFIs asset under management has grown five times since 31st March 2012.
Such huge rise in the AUM has been due to the reforms that were undertaken in the sector by the market regulator SEBI. And, one of the most important reform is the introduction of Direct Plans in 2013. It helped the investors to invest directly into the funds without any help of distributors or financial advisors. This resulted in the lower expense ratio and higher return because the commissions paid to distributors were eliminated and the benefits are passed to the investors.
Let’s discuss the various options available to invest in direct plans of a mutual fund:
Investing directly through AMC
Investors can invest in direct plans directly through the asset management companies. Investors have the options of both online and offline mode. In offline mode, the investor needs to visit the office of asset management company and submit the investment form, documents required, cheque with the investment amount and KYC document( if not done) with officials. In the investment form, direct plan of the fund should be mentioned.
In the online mode, the investor needs to visit the official website of the AMC (Example: sbimf.com or hdfcfund.com) and create an account with them. The investor needs to fill up the online form with the details of the fund and complete the transaction by paying online. In the case of SIP, one need to tick the option and fill the duration of the SIP. After completion, Folio no. of the investment will be generated for future reference. Investing through online mode, one needs to remember the login password for smooth transactions in future.
Investing through RTA portal (CAMS & KARVY)
The mutual fund Registrar and Transfer Agents such as CAMS and KARVY allow the investor to directly invest in mutual fund through their website. The services offered are free and also help to get the e-KYC done through their website
Investors can register and purchase mutual fund through CAMS online platform. With single login-id users can invest in multiple mutual funds. There is one limitation to the system on SIP. The investors cannot directly start SIP through the system. At first, the user needs to create a folio no. by investing lump-sum in the fund and then had to create a “Common One Time Mandate” by registering their bank details for the auto debit feature in SIP.
Karvy MFS, only existing investors with any mutual fund companies serviced by Karvy as a registrar can transact through the portal by registering their details of the previous investment.
The biggest limitation of both systems is, it does not provide services of all mutual fund currently operating in India.
Investing Through MF Utility
MF Utility is a single point interface system to invest in multiple mutual fund schemes. The system is owned and managed by 25 participating AMC. The services offered on the platform are free of cost and investor can opt for any regular and direct plans
To begin with, an investor first needs to get registered to have a CAN (Common Account Number). An investor has to be KYC compliant to get their CAN. Once CAN is created, all the existing folio under the PAN will be displayed where you can manage all your investment.
Registration can be done through both online ( e-can) and offline mode.
In registering through offline mode, an investor needs to send the following document to MFU office in Thane or MFU POS.
- CAN Registration form
- PayEezz Registration form
- Self Attested Copy of PAN Card
- Self Attested Copy of KYC document
- Cancelled Cheque
Investors opting for SIP in mutual fund need to register with the PayEezz. It facilitates the auto debit transaction from your account. It is similar to the ECS/NACH mandate for debiting bank accounts. Investor opting for lump sum does not need to register for PayEezz, they can opt Net Banking of NEFT options but it is recommended to have it.
Once, the registration process is complete, an investor can access all its existing investment and can create new investment without the hassle of filling the forms each time.
These are the various options to invest in direct plans, in each option, there are some pros and cons. It will take some time to develop the system around as all the system are new. But, the MF Utility and Directly from AMC options look better from a view of an investor.
The RTA system (CAMS and KARVY) has few serious limitation regarding no. of funds available and SIP related issues, and at some point of time, the investor will look for other options. MFU in the first-hand looks bit tricky but once all the process is completed it is the most simple way to get hold of all your long term investment needs.