The share of direct plans in equity and equity-oriented funds, where retail investors participate in large numbers, is less than 15 per cent currently. Since direct plans bypass the requirement of an intermediary like a distributor, the commission paid to them is excluded from the expenses charged to investors.
Thanks to this saving, direct plans lead to higher returns over the long term.
But lack of awareness about the direct route, coupled with lack of knowledge as to the modus operandi and paucity of time are attributed to the lacklustre retail participation in direct plans. Here’s a lowdown on how to invest in direct plans:
e-KYC
Typically, to invest in mutual funds, you need to fulfil the Know Your Customer (KYC) requirements. Normally, this process will be completed in 10-15 days once you submit the required documents, such as self-attested copies of proof of address, identity, etc.
But in recent times, KYC formalities have become hassle-free as these can be completed online. Called e-KYC, this verification is based on the Aadhaar number. However, currently, only investment up to ₹50,000 is permitted per mutual fund in each financial year under e-KYC norms through OTP. Investors have to undergo in-person verification if they want to invest more than ₹50,000.
You can choose one of the following modes to invest in direct plans:
