Thursday, January 4, 2018

Earn More Returns on Your Mutual Fund Schemes; Switch To Direct Mutual Funds

Mutual Funds are one of the best investment plans that are professionally managed and can accumulate money from several investors to get various securities like stocks and bonds. Nowadays, investment in mutual fund is more simplified than buying and selling of individual stocks. Mutual Funds can provide you highest returns compared to any other investment schemes.

Mutual Funds can get you to achieve the desired goals and earn returns on your investments, but you must be aware of the type of mutual funds that comes with a certain risk profile and returns. You need to be careful and aware before choosing the type of mutual funds investment to make the maximum returns on your investment.

You can invest in a mutual fund scheme under two ways:

· Through a mutual fund distributors (Regular plans)

· Directly with the funding firm (Direct plans)

Under Regular Mutual Funds, investment is done with the help of a distributor or a channel partner. Investment made from regular distributor or online fund investment comes under regular plans. You need to pay commission in regular plans, which differ across schemes and distributors. Mutual fund does not directly charge the commission, it gets paid from the fund itself and thus it affects your profits indirectly.

Under the Direct Mutual Fund, you get the facility of managing funds in a better way than the experts as you go to the mutual fund house directly for investment. As there is no role of any distributor or agents in direct mutual fund, there is no need of paying any commission or transaction fees to brokers. This is the reason that the expense ratio is less for direct plan when compared to regular plan. Expense ratio comprises of fund management fees, operational, marketing and fund distribution expenses. Lower expense ratios mean less cost and high returns, which is the primary reason why direct plans NAV is higher than regular plans NAV.

Advantages of Direct Mutual Funds over Regular Mutual Funds


Let us go through the advantages of investing in direct mutual fund. Making investments in direct mutual funds have become much easier and stronger than before. Check out the advantages of the same below.

· The expense ratio is lower in direct mutual fund than regular mutual fund as there is no role of intermediaries or distributors and you don’t have to pay any transaction fee or commission to them, which makes higher returns for investors

· The investor gets high returns on his investment in direct plans in long term and it becomes beneficial for the investor if invested in retirement plan to get the benefit of 15-20 years

· The Net Asset Value (NAV) is higher in direct mutual funds than regular mutual funds

· The investor earns 25 to 75 basis points higher in direct equities when compared to regular plan that is 0.25% to 0.75% more returns per annum

· The funds are managed by professionals in a better way to yield more returns

Some tips on Selecting Direct Mutual Funds

· As direct plans are cheaper, one should not consider low price as a criterion for fund selection

· Always select a fund with a good track record

· Select funds in consideration with your risk profile

· Funds should be from diversified fields to lessen the risk

· Keep an eye on stable funds rather than high return funds to reduce the losses at the time of economic failure

How do I buy a Direct Plan?


Direct Mutual Fund can provide higher returns compared to regular mutual fund plans. However, many of us do not know how to invest in mutual funds directly. Until recently, making an investment in direct mutual fund was far from simple. Nowadays, online investment advisers come with the convenience of one time registration and give recommendations about the best possible funds to assist you buy any direct mutual fund of your choice.
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