Direct Mutual Funds

Direct Mutual Funds – Meaning, How To Invest & Advantages 

Direct mutual funds are funds directly invested through the mutual fund house’s websites or the registered websites of stock exchanges. Investors can purchase the units of these mutual funds directly with the mutual fund firm rather than a distributor or other intermediary. 

The main advantage of direct funds is that the cost ratio of direct mutual funds is often lower than that of standard mutual funds since the investor does not have to pay any commission or charge to an intermediary or distributor.

This article covers: 

What Is Direct Mutual Fund? 

Direct mutual funds are an option wherein you can purchase the units of a mutual fund from a mutual fund house that launches the fund, and therefore, you do not have to pay a fee to any distributor. 

The Securities and Exchange Board of India (SEBI) created direct mutual funds in 2013 to provide Indian investors with a low-cost entry point into the mutual fund market. Direct mutual funds allow investors to bypass intermediaries and go straight to the fund firm.

Those who are familiar with mutual funds and confident in their ability to choose and monitor their holdings can choose direct mutual funds. Investors in direct mutual funds should weigh the fund’s performance and risks against those of traditional mutual funds before making a commitment.

How To Invest In Direct Mutual Funds?

You can invest in direct mutual funds online through the mutual fund house or AMC websites. Below is a detailed explanation of the direct mutual fund investment process:

1. Sign up for an account.

Register yourself with a stockbroker like Alice Blue by entering your personal information such as name, email address, and Aadhaar registered phone number. 

2. Finish the Know Your Customer (KYC) procedure.

Completing the KYC process is compulsory in order to invest in mutual funds. All you need to do is submit the essential documents like address proof, identity proof, bank details, and PAN card details. 

3. Choose how much to put in.

The next step is to settle on a budget for your investment. You’ll need a certain starting sum to put money into direct mutual funds, although that sum will change from one fund house to the next. In order to participate in some mutual funds, investors must have at least ₹500. A systematic investment plan (SIP) allows you to invest a predetermined amount at certain periods.

4. Commit money

After deciding on a mutual fund to invest in, determining how much to invest, and opening an account, you are ready to make a purchase. First, decide on a direct mutual fund in which you want to invest, and then decide on a payment method and the amount you wish to invest. You may use your debit card, credit card, or Internet banking to make a payment.

5. Monitor your spending

After you’ve invested in the mutual fund, you can track and monitor your investment by comparing the changes in the NAV. Keeping an eye on your investments’ progress and being prepared to make changes as needed is crucial.

List Of Direct Mutual Funds

Here is the list of direct mutual fund examples

S. No. Direct Fund Name Type of Mutual Fund1-Year Return NAV (in ₹)
1.Axis Bluechip Fund Direct PlanLarge Cap Equity Funds6.67%₹ 48.64
2.HDFC Index Fund – Sensex Plan Direct PlanLarge Cap Equity Funds12.48%₹ 564.17
3.ICICI Prudential Bluechip Fund Direct PlanLarge Cap Equity Funds13.23%₹ 75.75
4.Mirae Asset Large Cap Fund Direct PlanLarge Cap Equity Funds10.16%₹ 87.68
5.DSP Midcap Fund Direct PlanMid-Cap Equity Funds5.32%₹ 94.14
6.Kotak Emerging Equity Fund Direct PlanMid-Cap Equity Funds11.82%₹ 87.09
7.HSBC Midcap Fund Direct Plan Mid-Cap Equity Funds10.39%₹ 231.57
8.SBI Magnum Midcap Fund Direct PlanMid-Cap Equity Funds13.62%₹ 167.73
9.Axis Small Cap Fund Direct PlanSmall Cap Equity Funds13.59%₹ 73.49
10.HDFC Small Cap Fund Direct PlanSmall Cap Equity Funds23.91%₹ 94.25
11.Nippon India Small Cap Fund Direct PlanSmall Cap Equity Funds19.57%₹ 106.96
12.SBI Small Cap Fund Direct PlanSmall Cap Equity Funds14.14%₹ 127.74
13.HDFC Hybrid Equity Fund Direct PlanHybrid Funds15.25%₹ 93.8
14.ICICI Prudential Equity & Debt Fund Direct PlanHybrid Funds11.62%₹ 269.83
15.Mirae Asset Hybrid Equity Fund Direct PlanHybrid Funds10.84%₹ 25.75
16.SBI Equity Hybrid Fund Direct PlanHybrid Funds6.54%₹ 225.24
17.Axis Short-Term Fund Direct PlanDebt Funds7.12%₹ 28.36
18.Franklin India Short-term Income PlanDebt Funds7.29%₹ 5,008.71
19.HDFC Corporate Bond Fund Direct PlanDebt Funds7.1%₹ 27.96
20.ICICI Prudential Savings Fund Direct PlanDebt Funds6.47%₹ 466.28

Note: Data as of 5th May 2023

What Are Regular Funds? 

Regular funds refer to a kind of mutual funds that are distributed and marketed via intermediaries like brokers and financial advisers. These third parties facilitate the acquisition of mutual fund units by acting as a go-between for the investor and the mutual fund company. Commissions for intermediary services are often based on a fixed rate rather than a flat fee.

The cost ratio of regular funds is greater than that of money market funds since the mutual fund firm must pay a fee to the financial advisor. As a result, the fees paid by investors in regular funds are larger than those paid by direct fund investors. 

If you don’t have the time or knowledge to investigate and choose mutual funds on your own, you may benefit from investing in regular funds. Based on the investor’s investment objectives, tolerance for risk, and current financial status, the intermediary may recommend suitable funds for investment. The investor may also rely on the intermediary for assistance with making purchases, completing the necessary documentation, and keeping tabs on their assets.

Direct Vs Regular Mutual Fund  

The primary difference between direct and regular mutual funds is that direct funds are purchased directly from the mutual fund company, leading to lower expense ratios, whereas regular funds are purchased from a financial advisor or distributor, which includes additional commissions and results in higher expense ratios.

Here are some of the differences between direct mutual funds and regular mutual funds: 

Net Asset Value 

The NAV of the direct fund is higher than the regular fund because the NAV is adjusted after taking all the expenditures by the fund house. Since the cost is low in direct funds than the regular funds, the value of the investment and NAV is higher for the investors in direct funds.


The returns provided by direct funds are higher than the regular funds because the expenditure on purchasing them is low, and NAV is also high. 

Financial Advice

With direct funds, an investor has to make the investment decision by themselves, and no financial advisors are involved. However, the brokerage firm has in-house financial advisors who help investors with decision-making in regular funds. 

Advantages Of Investing In Direct Mutual Funds

Investing in direct mutual funds offers the advantage of a lower expense ratio, as it eliminates intermediary costs, such as distribution and commission fees. This can potentially lead to higher long-term returns due to the reduced expenses associated with the investment.

Here are the detailed advantages of direct funds: 

Heightened NAV

Direct mutual funds’ Net Asset Value (NAV) is greater than traditional mutual funds. This is because a larger amount of an investor’s capital is allocated to the underlying assets in direct mutual funds due to the reduced fee ratio. In the long run, investors may benefit from a greater NAV.

High returns 

Due to their reduced cost ratio and greater NAV, direct mutual funds may provide investors with superior long-term returns. Nonetheless, investors should be aware that mutual fund returns are vulnerable to market volatility and risk.

No conflict of interest

As there are no middlemen in the investing process, direct mutual funds are free of potential conflicts of interest. Because of this, the mutual fund firm bears full accountability for administering the fund and making investment choices that are in the best interest of the investors.

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Direct Mutual Funds- Quick Summary 

  • Direct mutual funds are funds that can be purchased directly from an AMC or mutual fund house.
  • You can invest in direct mutual funds through the online websites of the mutual fund house.
  • Examples of direct funds are Axis Bluechip Fund Direct Plan, DSP Midcap Fund Direct Plan, etc.
  • Regular funds can be purchased through any middlemen, such as stockbrokers or distributors. 
  • Direct mutual funds have a lower cost ratio and a greater NAV than regular funds.
  • The advantages of direct mutual funds are low costs, increased NAV and returns, and no conflict of interest. 

Direct Mutual Funds- Frequently Asked Questions

1. What is a direct mutual fund in simple terms?

Direct mutual funds are funds wherein an investor can directly invest in them through mutual fund houses. 

2. Is direct mutual funds safe?

Yes, direct mutual funds are safe because they are regulated by SEBI, which ensures the safety of investments. However, they are vulnerable to market risk and volatility just like any other investment.

3. Which is better direct or regular mutual fund?

Direct mutual funds are better than regular funds because they have a lower expense ratio. However, they may not be suitable for all investors as they require some investment knowledge. 

4. Which banks offer direct mutual funds?

Direct mutual funds are offered by most banks such as Axis Bank, HDFC, SBI, etc. 

5. Are direct mutual funds taxable?

Yes, direct mutual funds are taxable under the applicable tax rules of mutual funds on long-term capital gains, short-term capital gains, and dividend earnings. 

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