InvestorQ : What are direct mutual funds? Which is a good direct fund?
Suresh Patil made post

What are direct mutual funds? Which is a good direct fund?

Swapnil Sarang answered.
4 years ago

After you’ve decided to invest money in mutual funds, you have to deal with many questions regarding which funds you want to invest in. The choices are far too many- equity, debt, hybrid, tax-saving mutual funds, etc.

Additionally, you have to choose between buying the mutual fund directly and buying it via an agent. The former is the direct route, while the latter is the regular route of investing.

Direct mutual funds:

When you buy a mutual fund directly from a fund house, you are opting for the direct route of investing. You can invest directly in mutual funds only for three types of mutual funds:

1. Open-ended funds; except the funds that have either closed or withdrawn

2. New fund offers; including open-ended and close-ended

3. Interval funds

If you are investing in direct mutual fund, you will omit the role of an intermediaries such as brokers or agents.

The amount you pay for your mutual fund will also be lower as the direct mutual fund is free from commission or distribution fees,

which helps lower the expense ratio; expense ratio is the amount fund houses charge investors for the services they provide.

So, when you invest a lump sum amount or start an SIP in a direct mutual fund,

you will not be levied any transaction charges as you are paying the mutual fund company directly.

Thus, if you want to invest directly in to any mutual fund, you could search for the direct option in the mutual fund

documents to get your buying price or NAV amount.

Any fund that aligns with your investment period, investment class and holding period is a good fund.

A mutual fund’s performance doesn’t vary across direct or regular funds.