How to invest in mutual funds directly

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  Published in Stocks and Investing on Thu, Nov 11th, 2025 by The Financial Express

Investing in Mutual Funds Directly: A Practical Guide

In the world of mutual funds, investors traditionally route their money through financial advisors, distribution agents, or third‑party platforms that charge a distribution commission. Over the past decade, however, the “direct” channel has gained traction, offering a lower‑cost alternative that empowers investors to manage their portfolios with greater transparency and control. This article distills the key takeaways from a detailed feature on Financial Express that walks readers through how to invest in mutual funds directly, and it pulls in relevant links and clarifications for a fuller picture.

1. What is Direct Mutual Fund Investing?

Direct investing means purchasing units of a mutual fund directly from the fund house, without any intermediary. Because the distribution fee is waived, the expense ratio—already a cost factor in every fund—remains the only fee. For example, an equity fund with a 1.5 % expense ratio will cost an investor 1.5 % annually, versus 1.8 % if bought through an advisor (the 1.5 % plus a 0.3 % commission). Over long‑term horizons, that difference can translate into significant wealth creation.

2. Steps to Set Up a Direct Account

Quick Tip: Many fund houses allow you to convert an existing advisor‑based account to a direct account without surrendering the existing holdings.

3. Managing Your Direct Portfolio

Systematic Investment Plan (SIP)
A SIP lets you invest a fixed amount at regular intervals. Direct portals typically provide an “SIP Manager” that automatically debits the linked bank account, tracks your unit purchases, and sends periodic performance alerts.

Switch Facility
If your risk appetite changes, you can switch between schemes within the same fund house without incurring a transaction fee. Just log in, select the “Switch” option, and pick the target scheme.

Dividend Reinvestment
Direct accounts allow you to opt for auto‑reinvestment of dividends, which can accelerate compounding.

Exit Load & Redemption
All direct schemes adhere to the same redemption policy as regular schemes. The exit load (if any) is applied at the time of redemption, and the net proceeds are credited to your bank account. The minimum redemption period varies (e.g., 30 days for equity, 90 days for debt).

4. Tax Implications

• Equity Funds
  Short‑Term Capital Gains (STCG) – held < 12 months – taxed at 15 %.
  Long‑Term Capital Gains (LTCG) – held ≥ 12 months – taxed at 10 % on gains above ₹1 Lakh (after indexation).

• Debt Funds
  STCG – taxed at 20 %.
  LTCG – taxed at 20 % (post‑indexation) or 10 % (if the investment was in an ELSS scheme).

• ELSS (Tax‑Saving Equity)
  Deductible under Section 80C up to ₹1.5 Lakh (aggregate across all investments).
  5‑year lock‑in period.
  * Gains are taxed as equity funds (15 % STCG, 10 % LTCG).

• Re‑invested Dividends
  * Dividends received during the financial year are taxed as per the investor’s slab rate (unless the fund is a “Dividend‑Paying” scheme; then it’s treated as income).

Helpful Link: Financial Express provides a companion article, “Tax Implications of Mutual Funds: A Clear Breakdown,” which offers a deeper dive into these rules.

5. Choosing the Right Fund

Expense Ratio
The difference between direct and regular schemes is the distribution fee. Therefore, always compare the expense ratio of the direct option to the regular one. If the direct expense ratio is 1.3 % versus 1.6 % for the regular route, you’re saving 0.3 % of the invested amount annually.

Past Performance
While past performance is not a guarantee, it can provide insight. Look at 5‑year, 3‑year, and 1‑year NAV trends. Most direct portals offer a “Performance Chart” and a “Risk Profile” rating.

Fund Manager
Long‑term success often depends on the skill of the fund manager. Many direct portals provide “Manager Profile” pages with tenure and performance history.

6. Popular Direct Platforms Beyond Fund‑House Websites

While fund‑house websites are the most straightforward, several fintech apps aggregate multiple fund houses under a single umbrella, making direct investing even easier:

• Groww – Offers direct mutual fund investing for most major schemes.
• ET Money – Features a comprehensive dashboard for SIPs, lump‑sum, and portfolio analytics.
• Kuvera – Known for low‑cost, zero‑commission investing, especially for tax‑saving schemes.
• Fundsupermart – Provides a “Smart SIP” feature that automatically optimises allocation across multiple funds.

These apps often integrate KYC verification, bank linking, and investment tracking, making the process more user‑friendly for new investors.

7. Final Thoughts

Direct mutual fund investing is not just a cost‑saving strategy; it’s a shift toward greater financial literacy and autonomy. By eliminating the distribution layer, investors gain:

1. Lower Costs – The difference between direct and regular expense ratios can grow into significant wealth over 15–20 years.
2. Full Visibility – Every transaction, NAV, and fee is recorded in the investor’s direct portal.
3. Control – You can start, stop, or modify SIPs, switch funds, or rebalance at your discretion without paying additional fees.

For anyone looking to build a portfolio that reflects personal risk tolerance, investment horizon, and financial goals, direct investing offers a clear, transparent, and economical path. Start by selecting a reputable fund house, complete the KYC, open a direct account, and choose a diversified mix of schemes that align with your objectives. As you grow more comfortable, use the platform’s tools to monitor performance, reinvest dividends, and adjust allocations, all while keeping your costs at a minimum.

Happy investing!