How to Switch from Regular Mutual Fund to Direct Mutual Fund (Online and Offline)
And the Advantages of shifting Regular Mutual Fund to Direct Mutual Fund
Every mutual fund in India has two types of plans; one is REGULAR and another is DIRECT PLAN.
What is Regular Mutual Funds?
When you buy mutual funds from distributors, advisors etc. is termed as Regular Mutual Funds. In Regular plan, the investor can get the help of an adviser when doing the paperwork or choosing the funds based on his/her risk appetite.
Regular Mutual Funds has a higher expense ratio because of agents & distributors commissions.
What is Direct Mutual Funds?
When you buy mutual funds directly from the mutual fund company is termed as Direct Mutual Funds. Direct Mutual Plans have a lower expense ratio compared to Regular because it does not include commission, distribution expenses, etc.
Lower costs translate to better returns on investment.
Pointers to consider while switching from Regular Mutual Fund model to Direct Mutual Fund.
- You eliminate the intermediary so the commission aspect involved is avoided.
- This savings in commissions is added to the Direct Mutual fund returns in the form of a higher Net Asset Value (NAV).
- A Direct Mutual fund investor needs to handle paperwork by himself/herself since there is no intermediary.
- When you have invested your funds through the SIP mode, date of every installment is taken for calculation of the Exit Load
- Before taking the decision of switching your funds from the regular mode to direct mode, take into consideration the type of fund you have invested in. If you have invested in ELSS, then the product comes with a minimum lock in period of three years. Switching is not possible in this case.
- Long Term Capital Gains (LTCG) is another area that requires your consideration when you shift from Regular to Direct model of Mutual Fund
- Before investing in Direct funds, investor must understand about the scheme, its track record, mainly his/her financial goal and risk profile.
How to shift from Regular Mutual Fund model to Direct Mutual Fund?
You can shift from Regular Mutual Fund to a direct one in two ways – Online and Offline.
Offline method to shift from regular to direct mutual funds:
- Visit the AMFI website to get information about Mutual Fund Distributors who are registered.
- Fill in the CAN Form (Common Transaction Form) downloading the same from the MFU Website.
- Take the acknowledgement given by the Mutual Fund house on submission of the duly filled in form
- Remember to mention ‘Direct Plan’ in the form to avoid any confusion.
Online method to shift from regular to direct mutual funds:
Until recently, buying a direct plan was a tedious task. You have to register each mutual fund company website and do KYC compliance every time you invest in new mutual fund company.
An easier way of investing in direct plans is through online portals like CAMS, Clearfunds, zerodha.com etc.
Follow the below steps to shift your Regular mutual funds to Direct Mutual fund online:
- Log on to the myCAMS site with your login credentials
- Click on the Switch button displayed under the Transact option
- Choose the Folio number and the name of the AMC
- Accepting the terms and conditions displayed will initiate the switching process instantaneously or on a later date as specified by you.