I have been investing regularly in mutual funds for about 10 years now. The earlier investments were through a distributor. Even after introduction of direct schemes, I did not switch over to the ‘Direct’ mode. But now while investing, I skip the ‘distributor’ code and leave the ‘EUIN’ (employee unique identification number) column blank and submit the ‘EUIN Declaration.’ Please advise me on the monetary impact of continuing with the indirect mode in the old schemes.

Also, let me know if I should switch over to the ‘Direct’ mode fully. I will invest in mutual funds regularly at least for the next five years.

Arunachalam R

Can you make suitable fund choices in keeping with your age, goals, time horizon and risk appetite? Is your distributor transparent about his commissions? Is he knowledgeable enough about funds? Does he keep your best interests in mind while suggesting schemes or is he leading you up the garden path, just to make a quick buck?

Your answers to these questions will help you choose options that best serve your needs. This will help you decide whether you want to take the direct route or the indirect one. Also, there are financial advisers who, for a fee, suggest schemes and then allow you to invest directly in the scheme. Check if such an arrangement would work for you.

Skipping the broker code and leaving the employee unique identification number blank in the form means that you are investing in the direct mode.

As regards the financial implications, fund charges vary between direct and indirect mode. For example, if an equity fund’s charges are 2.5 per cent in the indirect mode, they could come down to 1.5-1.8 per cent in the direct mode.

Over the long term, this could make a significant difference in overall returns, especially in debt-oriented funds.

If you choose to switch your existing portfolio to direct mode, there would be an exit load depending on how long you have been invested in the scheme, besides having implications on capital gains.

Currently, ‘direct’ investments can be done online through the websites of most fund houses.

You can consider putting all fresh money through this mode and slowly move your older schemes to the direct mode.

I am 33 and am a bank manager. I am married and have a one-year-old son. Currently I do not have any investments, but I have three active traditional insurance policies for which I pay a premium of ₹3,700 quarterly. Kindly suggest some investment avenues for me.

Asish Chandran

You have been a tad late in starting your investments. Also, by investing only in insurance policies you have not put your money in the right channels to maximise gains. Traditional insurance policies are expensive and do not provide inflation-beating returns.

Hence, stop further investments in these if you have made the payments for the mandated period.

Take a term cover and a medical insurance policy with family floater option (even if your bank covers you) immediately.

Start investing in hybrid schemes and funds that invest predominantly in large-caps, for starters. You can invest in HDFC Balanced and ICICI Pru Focused Bluechip.

Try to channelise savings towards specific goals such as your son’s education, your retirement and develop a long-term investment strategy.

After your surplus grows, increase investments in debt (PPF, NSC, etc), gold and, if possible, real estate to build a balanced portfolio.

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