How to make money: Is it wise to invest in direct mutual fund plans? Experts say you should do this

Mutual Funds: By investing in direct mutual funds instead of regular plans, one can save the brokerage by lowering the expense ratio and thereby get benefit of increase in NAVs.

What Direct mutual fund means is that you buy directly from the MF and thereby you don’t avail of the services of any distributor or advisor. Photo: Pixabay

Mutual funds are fast gaining popularity among Indian millennials and one of the best examples of this is the rise in investment in direct mutual funds. According to the Association of Mutual Funds in India (AMFI), investment in direct mutual funds is around 43 per cent in 2018, which means people are investing in mutual funds on their own and they don't want any expert opinion or advise from brokers while investing their money.

Speaking on the direct mutual fund investments, Mumbai-based expert Prakash Ranjan Sinha said, "A direct mutual fund is what you buy directly from the mutual fund company. You don’t avail of the service of any distributor or advisor in an official way. You have to do all the research, fact-finding and investment by yourself. The NAV is higher than regular plan when you are investing as due to lower expense ratio that has compounded to higher NAV growth." Elaborating on how the direct mutual fund plan is different from the regular mutual fund plans, Sinha added, "There is a difference in expense ratio and different NAV. The fund management, portfolio, asset allocation, strategy and style all are the same. There is no brokerage payment involved in direct mutual funds as it is in the regular mutual funds but then in regular mutual funds you can also avail the professional advice of distributor, which is non-existent in direct mutual funds." He said that investors invest in direct mutual funds online by going at the direct mutual fund platforms available in the online domain.

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Suggesting who should be investing in direct mutual funds, Kartik Jhaveri, Manager — Wealth Management at Transcend Consultants said, "Direct mutual funds are not for those who are new in investment and they don't have much knowledge about the market movement. Someone who has been investing for long and has a good idea about the fund performances and market movements, should not be wasting money in paying advisers through brokerage charges. So, direct investment is for such highly informed investors."

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