DIRECT Plan – Mutual Funds

Mutual Funds are one of the best ways to create and manage wealth. It’s convenient, low cost, well-regulated, transparent and gives benefit of diversification. Starting January 1, 2013 SEBI had mandated all fund houses to have two version of each scheme – Direct & Regular.

Direct vs. Regular:

As the name suggest ‘Direct’ plan are low cost plans where the investor invests directly with the mutual fund AMCs. The direct plans have lower expense as they do not incur cost in terms of commission to intermediaries. The difference in returns can be in the range of 0.25% to 1% between direct and regular plans – which in long term converts to substantial amount. Therefore you should always prefer invest in Direct Pans of Mutual Funds.

Through Mutual Fund Website

Almost all major Mutual Funds AMCs provide facility for managing investment online which includes purchase, redemption, switch and setting up SIP. To start investing you just need to sign up with the AMC website.

The Good:

There is NO third party involved and the transaction happens between you and the AMC. In case of any issues you can directly contact the mutual fund helpline. This suits investors who have investment across few mutual fund houses.

The Bad:

The biggest problem is if you have investment across multiple fund AMCs you need to remember separate login details of each AMC – which might be overwhelming for some.

The second issue is the investment or redemption process varies across portals, in case you are not tech savvy you might have issues navigating through different portals.

The Third issue is you cannot view and analyse all your investments at one place. However the common account statement solves this problem to a large extent.

Through RTAs (CAMS/karvy)

RTAs or Registrar and Transfer Agent are the one who handle transactions on behalf of mutual funds. There are four RTAs in India. Most mutual funds are served by CAMS & KARVY (list below) while Templeton RTA serves Franklin Templeton Mutual Fund and Sundaram RTA serves Sundaram Mutual Fund. Both Karvy& CAMS offer online investment through their website and Apps.

The Good:

You just need to remember 1 or 2 login details as most of mutual funds are handled by Karvy or CAMS.

You can invest both offline & Online through Apps & Website

The Bad:

There are no cons as such but you have to remember 4 login details in case you want to invest in Franklin Templeton Mutual Fund, Sundaram Mutual Fund and others.

Through MF Utility (MFU)

MF Utility (MFU) is a transaction aggregating portal which connects investors, distributors, collection banks, payment aggregators, mutual fund houses, and RTAs. As of today it supports 27 mutual fund AMCs and once you have an account with MFU you can invest across all these fund houses seamlessly. MFU provides a common account number (CAN) which can be used across all 27 participating AMCs.

The Good:

You can invest in 27 mutual fund AMCs by logging in to one MFU portal.

Multiple transactions across participating mutual funds can be executed through one form which makes it convenient to use. Additionally you just need to make one single payment for investing across multiple schemes if done at a time. This facility is not available in any other channel.

The Bad:

MFU still services 27 out of 45 Mutual Funds. So you cannot use MFU if you want to do transactions outside of these 27 AMCs.

The user interface is NOT great and there is scope of improvement.

There has been NEWS at times about selling the MFU Portal (which has been denied by concerned authorities). But in case the MFU platform is sold-off, it might not offer DIRECT schemes or may offer for a fee!