Personal Finance

The direct route to mutual funds

Dhuraivel Gunasekaran | Updated on January 13, 2018 Published on March 05, 2017


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Direct plans offer higher returns over the long term. A lowdown on how to invest in them

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:


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:

AMC websites

In India, almost all fund houses (asset management companies or AMCs) provide the facility to invest in lumpsum and by way of SIPs through their websites. Procedures such as creating log-in ID and password, providing supplementary KYC information, etc. is similar across fund houses.

Investing through AMC web sites is easier if you are already KYC-compliant. Many AMCs have enabled the online facility to obtain e-KYC as well.

Once signed up, you are required to select the schemes that you wish to invest in. A Unique Registration Number (URN) will then be provided to register with your bank for online transactions. You can purchase, redeem, switch, start an SIP, view portfolio and request for account statement through these portals.

While the process is not tedious, the downside here is that not all the schemes may be available for subscription on the AMC website. Secondly, if you wish to invest in schemes in different AMCs, then you have to repeat the same process with each AMC, which is time consuming.

R&T agent portals

Registrar and Transfer Agents (R&T) such as CAMS and Karvy, which take care of the transaction processing for various mutual funds, also allow direct subscriptions through their web portals and mobile apps. They offer this facility for free. CAMS and Karvy help to get e-KYC done through their portals as well.

Under CAMS online (myCAMS), investors can create a single login user id to transact across all mutual funds serviced by CAMS as Registrar.

Through the ‘Common One Time Mandate’ facility, you can register your bank details for auto-debit transactions to make the investments. But the flip side is that you cannot start SIPs directly in CAMS. You have to create a folio number first by investing a lumpsum in any of the mutual funds.

Besides, currently, out of the 15 fund houses that CAMS serves, 11 have been enabled for lumpsum purchases and five for SIPs. Under Karvymfs, a fresh investor cannot invest through its online portal. But existing investors with folio numbers with any of the mutual funds serviced by Karvy as Registrar can transact through the Karvy portal by registering their details.

MF Utility

Considering the drawbacks of the above two methods, investing through MF Utility (MFU) at seems a good choice. Promoted by the Association of Mutual Funds of India (AMFI), MFU facilitates investors with a Common Account Number (CAN) to transact in multiple schemes of various mutual funds. It’s a convenient way for investors to invest in direct plans from different AMCs through a single interface. The service is free and paperless.

Creation of CAN is mandatory, which can be done either online or physically (by mailing documents). MFU takes at least one week to approve the CAN. Post-allotment of CAN, you need to send a request email for obtaining the username and password. Once this is allotted, you can purchase, redeem, set up and cancel SIPs in MF schemes from participating fund houses. Currently, 26 AMCs are registered under the MFU.

Through CAN, all the existing folios of all participating AMCs under the investor’s PAN can also be mapped. Submitting PayEezz form (a one-time ECS mandate for debiting bank accounts), will enable initiating SIP transactions through the MFU.

Through the MFU, investors will be able to have a consolidated view of their holdings and transactions. The MFU will also provide value-added services like Common Account Statement (CAS), alerts, triggers, reminders, etc, to investors.

Online advisories

Finally, there are many online advisories that enable you to invest through direct plans in mutual funds. OROWealth, BharosaClub, Unovest, Invezta, and Clearfunds are a few. Some of them have partnered with MF Utility. Most of them do not charge for investing in direct plans through them. However, they charge something for the value-added services they provide, such as wealth advisory services.

Published on March 05, 2017
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