The benefits of Direct Mutual Funds online investments.

For most of us, investing in mutual funds is a big blurry world. First, you have to get through the ordeal of selecting the right few funds from amongst the hundreds on offer. Then, you have to get into the transaction mode yourself and understand the nitty gritty of investments.

From Jan 1, 2013 mutual funds started offering a new plan called “Direct Mutual Funds” in all their mutual fund schemes. So, if want to invest in a Mutual Fund Scheme A, it would come in the following variants.

Scheme A – Regular Plan – Growth
Scheme A –  Regular Plan – Dividend
Scheme A – Direct Plan – Growth
Scheme A –  Direct Plan – Dividend

The big difference between a regular plan and a direct plan is that in the latter, there is absolutely no payment of commissions to any distributor. The smart and informed investor chooses the ‘direct plan‘to invest in mutual funds.


Several online investing platforms such as Orowealth, FundsIndia, NJfundz, etc. started offering a single point online investment solution. Most banks too offer an online investing facility in mutual funds. One time signup with all the paperwork and you are done. You can simply login and start investing in and tracking your mutual funds.

Mutual fund houses, from their side, have also launched their own website applications where you can track, and invest in their schemes. You will have to register separately with each mutual fund thus creating many User IDs and passwords.

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.

The basics of investing in Direct Mutual Funds

Read on to find out some basic answers to some basic questions about Mutual fund investments.

Size of Investment: The amount you invest in Mutual Fund should be according to your Pocket Size. Do not decide the amount on any other criteria.

Type of Investment: You may investment in Equities or Debts or choose a balance between both. That is you can invest in Equity-oriented, Debt-oriented funds, Dynamic funds or Balanced funds. Choose an investment which suits your income requirements and risk taking capacity.

Analysis of Investments: Analyse the various plans available by yourself or take help from financial advisors like OroWealth before investing. Also remember to analyse the performance of your Investments in Direct Mutual Funds and take corrective action.

Speed of Wealth Accumulation: “Mutual Fund Investments are subject to Market Risks.” Do not expect to become rich in no time. The speed at which your fund grows depends on market conditions. Such investments are a secondary source of income. Keep an eye on your investments to make sure you do not lose your hard-earned money.

Diversification of Investments: Investments should be diversified. One should invest small amounts in different types of funds instead of investing all money in same or similar funds. This reduces the risk and increases the returns and helps in wealth creation.

Mutual fund classification based on the investment period

The mutual fund industry of India is a less spoken and little understood industry in India. Less than 10% of our households consider mutual funds as an investment option, based on reports. Due to the technicalities surrounding the mutual fund industry, ever changing stock market and hawk eyed commission agents, it is considered as a high-risk option.

That is the reason why several industry bodies are focusing towards investor education. Armed with basic information on the types of mutual funds, investors realize that these are perhaps one of the most flexible, comprehensive and rewarding modes of investments and can accommodate all types of investor needs.

Various types of mutual funds categories are designed to allow investors to choose a scheme based on the risk they are willing to take, the investable amount, their goals, the investment term, etc.

Depending on the number of days or time period one is interested in investing, the types of mutual funds are divided into three categories

I. Open-Ended - Open ended scheme of mutual funds allows investors to invest, but our sell units at any point in the scheme period. These mutual funds do not have a fixed maturity date.

II. Closed-Ended - Close ended schemes have a pre decided maturity period or time period. The rule says that investment can be done only during the initial launch period of the scheme, also known as the NFO (New Fund Offer) period.

III. Interval - It is a combination of closed and open ended schemes, it allows investors to invest and trade at pre-defined and fixed intervals.

Direct mutual funds - A reliable option to invest your money

For Many people Savings means Fixed Deposit or Recurring Deposit in a Bank or Post Office. But there are other options where investing your savings can help you earn more than Interest on Deposits.

Gold Bonds/ Public Provident Fund/ National Savings Certificate: These are issued by the Government of India, are completely safe and give good returns.

Insurance policies: Investing in Insurance Policies indemnify you against loss of life and property and also give risk free returns.

Debentures: All limited companies issue debentures. These are actually instruments of debts, that is, you give a loan to the company and earn interest thereof. These debentures can be redeemable, loan will be repaid by the company at the end of the said period.

Equities: These are also issued by limited companies. When you buy shares, you become owners of the company to the extent of your shareholding and are eligible for a share in profits called Dividends.

Mutual Funds: These are pooled funds of various small investors, which are then invested into Debentures and Equities, the ratio depending on the risk taking the capacity of the investor. They are also subject to Market Risks, but being managed by experts, the risks are marginalized. However, a study of various schemes is required before investing.

Direct Mutual Funds: They are same as Mutual Funds but with the difference that no distributor/agent is used, i.e. the investor directly invests in Mutual Funds thus saving on distributor fees/commission. This results in increase in profits due to reduction in expenses.

A word of caution : Do not to put all your eggs in one basket. Do not invest all your money in any one company or scheme. Study all available options and choose the one which gives requisite returns in the time you are aiming with the risk you can handle.