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 How to Invest in Direct Mutual Funds

 How to Invest in Direct Mutual Funds

You will be puzzled about the right strategy to invest in direct mutual funds. Don’t worry. We will help you out. In this blog, we will explore the reasons for investing in direct mutual funds and detail the approaches to investing in them.

Table of Contents:

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What are Direct Mutual Funds?

What are Direct Mutual Funds?

Direct mutual funds are a type of investment where investors can directly buy and sell fund units from the fund house without involving any intermediaries like brokers or distributors. Direct mutual funds differ from regular ones by not having distribution fees or commissions. Investors can directly approach the Asset Management Company (AMC), as they manage investment portfolios on behalf of individuals or institutions, for investments. While the absence of distributor commissions can potentially yield higher returns, investors need to conduct their own research and make independent investment decisions, as there’s no guidance or assistance from intermediaries.

Direct mutual funds are becoming more popular as investors become increasingly aware of the impact of fees on investment returns. Various online platforms and asset management firms offer direct plans, providing investors with convenient digital access to manage their investments. This shift toward direct mutual funds aligns with a growing trend in the financial industry, emphasizing transparency and empowering investors to take greater control over their investment decisions.

Why Should We Invest in Direct Mutual Funds?

Why Should We Invest in Direct Mutual Funds?

Putting money into direct mutual funds offers several benefits when compared to investing in regular mutual funds. Here are a few of these advantages:

  • Decreased Fee Ratios: Direct mutual funds typically feature lower expense ratios compared to regular mutual funds, given the absence of distributor commissions and intermediary fees. This cost efficiency has the potential to enhance long-term returns for investors.
  • Flexibility: Investors have the flexibility to select and oversee their investments in alignment with their preferences and financial objectives, free from the influence of intermediary recommendations.
  • Higher Returns: Investors in direct mutual funds have the opportunity for potentially higher returns over the long term, given the lack of distributor commissions. The absence of these fees contributes to improved overall returns on investments.
  • Investing with Lower Amounts: Many direct mutual funds allow investors to begin with modest investments, presenting an appealing choice for those initiating their investment journey. This cost-effectiveness makes them especially attractive for individuals in the early phases of constructing their investment portfolios.
  • Investing at Regular Intervals: Numerous direct mutual funds provide the option of systematic investment plans (SIPs), enabling you to invest a consistent amount at regular intervals. This approach offers an effective means to invest consistently and gradually build your wealth over the course of time.

How to Invest in Direct Mutual Funds Online

How to Invest in Direct Mutual Funds Online

Investing in direct mutual funds is made possible by different online brokers, including platforms like Groww, Upstox, and Zerodha. These brokers offer all the necessary tools and features essential for investing in direct mutual funds.

Here’s a guide on how to invest in direct mutual funds online:

Step 1: Choose a Platform for Online Investments

Choose a reliable online platform that offers direct access to mutual funds. Make sure the platform is well-regarded for its trustworthiness and transparent services, giving you confidence in your investment decisions. Opt for a respected provider that suits your financial objectives and provides a user-friendly interface.

Step 2: Register an Account and Fill Out KYC Requirements

Create an account on the platform, add details, and undergo the online Know Your Customer (KYC) process. Typically, this requires submitting identity proof like a PAN card, address proof such as your Aadhaar card, and other relevant documents. Upon the completion of your account setup and KYC, you’ll be granted access to a variety of direct mutual funds.

Step 3: Explore and Choose Mutual Funds

Explore the range of direct mutual funds offered, taking into account your specific investment objectives. Assess the available options, with a focus on aligning the funds with your financial goals. Ensure that the selected funds correspond well with your investment strategy, risk tolerance, and anticipated returns.

Step 4: Define Investment Parameters

Decide on the investment amount, the duration of your investment, and whether you prefer a systematic investment plan (SIP) for consistent contributions. Personalize these choices based on your financial preferences and goals, ensuring your investment strategy suits your specific needs.

Step 5: Complete the Transaction

Proceed to finalize your investment transaction, utilizing convenient payment methods like net banking, UPI, or debit card. Take precautionary measures to secure your financial information throughout the payment process.

Step 6: Monitor Investments

Once your investment is finalized, keep track of your direct mutual fund holdings through the platform to stay informed about their performance and any updates. 

  • Conveniently track and manage your investments with up-to-date information provided online.
  • Invest either through lump-sum payments or systematic investment plans (SIPs), and effortlessly switch between different schemes as needed.
  • Cut down on paperwork by using digital documents and electronic statements. It’s an easier and more eco-friendly way to keep track of your financial records.
  • Online transactions commonly involve lower fees and expenses when compared with traditional or offline methods, resulting in potential savings for investors.
  • Online mutual fund providers ensure the safety and security of your investments, employing strong measures to protect your financial assets.

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How to Invest in Direct Mutual Funds Offline

How to Invest in Direct Mutual Funds Offline

Another method for investing in direct mutual funds involves offline methods, such as approaching an asset management company in person. This traditional approach allows investors to engage directly with an AMC representative, facilitating face-to-face interactions and paper-based transactions.

Investing in direct mutual funds offline involves the following steps:

Step 1: Locate a Nearby Office and Collect Application Form

Locate the office of the Asset Management Company (AMC), such as HDFC AMC, ICICI Prudential AMC, or an authorized agent nearby, and get the paper form for the direct mutual fund you want. You can pick it up at the office or ask the agent to give it to you.

Step 2: Submit the Form along with KYC Documents

Complete the application form with accurate details, including personal information, investment amount, and choice of mutual fund. Attach the required Know Your Customer (KYC) documents, including a copy of your PAN card, Aadhaar card, and proof of address.

Step 3: Make Payment

Fulfill the payment for your investment using a cheque or demand draft, ensuring it is made out to the specific mutual fund’s name. Verify that the payment method accurately reflects the intended fund to avoid any processing issues. 

Step 4: Get Acknowledgment Slip

You will be provided with an acknowledgment slip or receipt confirming your investment, which will include vital information, including the folio number. This documentation is crucial for record-keeping and ensuring the accuracy of your investment portfolio. 

Step 5: Monitor Investments

Monitor your direct mutual fund investments by regularly reviewing the statements provided by either the mutual fund company or your chosen intermediary. These statements offer valuable insights into your investment performance and can help you make informed financial decisions.

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  • Direct engagements with agents or company representatives offer individualized guidance and support through in-person interactions.
  • Diversify your investments across a range of mutual fund schemes, including those not accessible through online platforms.
  • Individuals lacking consistent internet access or familiarity with online procedures may find physical offices more accessible.
  • Instant resolution of doubts or inquiries through direct communication with intermediaries.
  • Offline interactions can provide investors with valuable educational insights, allowing them to learn about investment strategies and market dynamics through discussions with intermediaries.

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Top 10 Direct Mutual Funds in India

In India, there is a wide range of direct funds, and selecting the right one requires a careful assessment of your risk tolerance. Additionally, it’s essential to weigh the Asset Management Company’s (AMC) historical performance and the assets under management (AUM) from previous years. 

Here are the top 10 direct mutual funds in India:

Mutual Fund SchemeCategory5-Year Return (%)Expense Ratio (%)Asset Under Management (AUM ₹ Cr)
Quant Small Cap FundSmall-cap54.951.053,077.37
ICICI Prudential Nifty Smallcap Index FundSmall-cap 54.820.456,329.48
HDFC Small Cap FundSmall-cap54.761.0528,473.59
SBI Small Cap FundSmall-cap54.651.1317,016.86
Kotak Small Cap FundSmall-cap54.581.1512,371.60
Axis Small Cap FundSmall-cap54.521.0831,225.83
Nippon India Small Cap FundSmall-cap54.381.1014,385.29
Parag Parikh Flexi Cap FundFlexi-cap52.641.0438,240.84
Canara Robeco Emerging Equities FundLarge & mid-cap51.911.018,062.22
Mirae Asset Emerging Bluechip FundLarge & mid-cap51.630.917,271.71


Investing in direct mutual funds offers numerous advantages, including lower expense ratios, flexibility, and potentially higher returns. Whether you choose to invest online or offline, the key is to align your investments with your financial goals and risk tolerance. The shift towards direct mutual funds represents a growing trend in the financial industry, emphasizing transparency and empowering investors to take control of their financial future. To make the most of direct mutual fund investments, conduct thorough research, select funds carefully, and stay informed about their performance. Your financial future is in your hands – make it count!

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About the Author

Vice President

With an MBA in Finance and over 17 years in financial services, Kishore Kumar boasts expertise in program management, business analysis, and change management. Notable roles include tenure at JPMorgan, Nomura, and BNP Paribas. He is recognized for commitment, professionalism, and leadership.