Points to remember for direct mutual fund investments

Mutual fund is nothing but a combined pool of money that is invested by many people. It results in long term profits.

An investment is usually made by any person through an agency, distributor or online portal. Even though this method has been followed for long, it leads to deduction in commission from the amount that one is investing, and only the balance is invested in mutual fund. The amount deducted may seem insignificant when compared to the invested amount, but its burden can only be well understood if seen over the long run as the sum multiplies.

To avoid this scenario, the Government has passed new guidelines enabling an investor to invest without paying commission. An investor can investing directly in Direct Mutual Funds and thus save the charges of commission.

The point to remember here is that this saving is directly proportional to the commission. The funds where the commission charged is higher, the benefits of direct investment will also be greater. One can also get more benefits from direct investment with high starting investment amount.

Before investing in any Direct Mutual Fund, the various factors to analyse the benefits of different funds are:

1.       Investment amount.

2.       Investment period.

3.       Risk to Return ratio.

4.       Lock-in Period

5.       Liquidity of assets.

To sum up, remember to diligently review the performance of the fund, its ratings, liquidity, the risks and returns involved, lock in period and its suitability to your reasons for investment before investing in any mutual fund, directly or otherwise.

What are the Direct Mutual Funds in India

Mutual funds are maintained by firms that pool people’s money that is reinvested, converted into earnings and redistributed. There are numerous types of mutual funds available in India like gold scheme, bonds, shares, etc. There are two main means of investing in mutual funds: Regular and Direct. Investment done through a distributor is known as Regular and one gets to invest on their own with Direct Mutual Funds.

One can increase the returns by 0.5% for equity funds by directly investing in mutual funds. But the basic knowledge for direct investment is the type of funds, their lock-in periods, and the amount to be invested and the risks involved in various funds available. There is also a lot of time and energy involved in direct funds as they need regular monitoring and timely modifications to be on track and achieve the target, which is taken care by your distributor in regular fund.

One can invest in Direct Mutual funds by visiting the local offices of the mutual fund company or online through AMC’s website, MF utility or the direct company website. But all these have major drawbacks are not investor friendly. The definition of investment has been redefined in the past few years with Oro wealth, the online advisory platform which make investments user friendly and hassle free. For a small fee, Orowealth helps in selecting MFs, making investments, redemptions, SIP cancellations, portfolio review etc. without the hassle of logging into multiple AMC portals.