How Direct Mutual Funds Save You Money Over Regular Plans. While planning a mutual funds investment in India, one smart option to save more money is by opting for direct mutual funds over regular plans. Nowadays, many investors don’t realise how much money they can save by reducing the intermediaries. Let’s break down how it really works and why it matters for your returns.
What Are Direct Mutual Funds?
Direct mutual funds are the type of fund schemes that you buy directly from the fund company, without including a broker or distributor in your investment. This means you don’t need to pay any commission fees.
On the other hand, regular plans come with a commission that the fund company pays to the distributor each year and this hidden cost can reduce your over returns.
How Direct Mutual Funds Save You Money Over Regular Plans
Here’s how shifting to direct plan mutual funds from a regular plan can give more return in your pocket over time:
Lower Expense Ratio:
Direct plans have a lower expense ratio as compared to the regular plans and the difference in their expense ratio is usually between 0.5% to 1% every year. It may look small to you but over time it makes a huge difference in your overall returns.
No Commission Charges:
You don’t need to pay any commission to the distributor. Because this amount will stays invested in your mutual fund portfolio and grows together with your investment.
Better Long-Term Returns:
Even if you’re able to save a small amount every year, it can give you good returns over time with the help of the power of compounding.
For example, an investment of ₹10 lakh in a direct plan can even earn you lakhs if you stay invested for long-term as compared to the same regular plan.
More Transparency:
Direct plans give you a better understanding of how your money is performing in the market without any hidden costs.
AMFI’s Guide to Direct vs Regular Mutual Funds
How to Invest in Direct Mutual Funds
It’s simple to make investment in direct mutual fund plans if you know the right approach. Here’s how you can start investing in direct mutual funds:
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Visit the Fund House Website:
All principal AMCs (Asset Management Companies) let you make investment directly through their websites or user-friendly mobile apps. -
Use Reliable Platforms:
You need to use trusted and well-established platforms that can help you invest in direct mutual funds with no additional charge. -
Do Some Research:
Learn about the different schemes, check the ratings of the fund you’re investing in, and compare returns from different fund companies. Because, knowing how to choose the right mutual fund in India is crucial before you start your investment journey.
Important Point to Remember
Always keep these important tips in mind to make the most out of direct mutual fund plans:
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Direct plans need you to do your own research by not following the hype.
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There is no financial advisor, so you need to be comfortable handling your investments on your own.
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Always make sure to check the expense ratio before investing. Because, lower the expense ratios, higher will be your overall returns for the long-term.
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Make sure to review your portfolio regularly to make sure it matches with your financial goals and do the adjustment if needed.
Conclusion
Picking direct funds is one of the best mutual fund portfolio strategies for 2025 if you really want to boost your overall returns over time and save on unnecessary charges. On the next occasion, if you plan a mutual funds investment in India, make sure to consider a direct mutual fund plan in your portfolio.