Best Platforms For Direct Mutual Fund Investments

Direct mutual funds are a savings plan that allows individuals to save and grow their money for the future. They are called direct because investors put their money directly into stocks or bonds without going through intermediaries like financial advisors or brokers. This means that investors do not have to pay extra fees to a middleman. Direct mutual funds are a great option for young people or those who are just starting to save and invest.

There are several platforms that offer direct mutual fund investment in India. These include Zerodha, Groww, Kuvera, Paytm Money, 5paisa, and ET Money. Each platform has its own features, fees, and investment options. For example, Zerodha Coin offers access to over 2,200 mutual fund schemes, while Kuvera provides access to over 5,000 direct mutual funds.

When choosing a platform for direct mutual fund investment, it is important to consider factors such as user-friendliness, regulatory compliance, fund selection, cost and fees, performance tracking, security features, and customer support.

Direct vs Regular Mutual Funds

Every mutual fund comes in two versions: direct and regular. Direct mutual funds are offered directly by the Asset Management Company (AMC) to the customers, while regular mutual funds are procured through intermediaries like brokers, financial advisors, or distributors.

How to Purchase

Direct mutual funds can be purchased directly from the AMC without involving intermediaries. Investors can access direct plans through the fund's website or by visiting the fund house in person. Regular mutual funds, on the other hand, are bought through mutual fund distributors or advisors. Distributors or advisors provide services like advising investors on which schemes to invest in, helping with the investment process, and providing ongoing services.

Price and Costs

The Net Asset Value (NAV) of direct plans is higher than that of regular plans. This is because the Total Expense Ratio (TER) of regular plans is higher, as it includes distribution costs or commissions paid to the intermediaries. The TER is charged to the investor to cover the recurring operating expenses incurred by the mutual fund company in servicing the investor. As a result, the expense ratio, or the fee charged for managing and operating the fund, is lower for direct mutual funds.

Returns

The difference in TER between regular and direct plans can range from 0.5% to 1%. This affects the returns of the two types of funds. For example, if the TER of a regular plan is 0.75% more than that of a direct plan, the direct plan will give 1% higher CAGR return than the regular plan. Over a long investment horizon, the difference in returns can be substantial.

Role of Financial Advisor

Direct plans are typically chosen by investors who do not need the help of financial advisors, as they have some investment experience and knowledge. These investors are willing to devote time to monitoring the performance of their investments and making their own investment decisions. Regular plans, on the other hand, are attractive to investors who seek comprehensive support and advice, especially those who are new to investing.

Platforms for Direct Mutual Fund Investment

Some of the best platforms for direct mutual fund investment in India include:

• Zerodha Coin
• ET Money App
• 5Paisa
• Paytm Money App
• MyCAMS App
• Groww
• Kuvera App
• Angel One App

The decision between direct and regular mutual funds depends on an investor's preferences, financial expertise, and goals. Regular funds offer the guidance and support of intermediaries, while direct funds offer lower fees and potentially higher returns. Investors should carefully consider their financial circumstances, aspirations, and risk appetite before choosing the type of mutual fund that best suits their needs.

Online Platforms

Zerodha Coin

Zerodha Coin is a popular choice among investors, with over 1.3 crore customers and a user-friendly interface. It offers access to more than 2,200 mutual fund schemes from over 41 asset management companies (AMCs), including well-known fund houses such as HDFC, SBI, and Aditya Birla. Zerodha Coin provides a centralised demat account, allowing users to manage their investments in one place. It also offers a Systematic Investment Plan (SIP) feature, flexible SIP management, and 0% commission on direct mutual funds and NPS investments.

Kuvera

Kuvera is a high-end mutual fund app that offers a completely free platform for investing in direct mutual funds. It provides access to over 5,000 direct mutual funds from various AMCs across India, including equity, debt, and hybrid funds. Kuvera stands out with its goal planning calculator, portfolio import feature, and personalised investment recommendations based on the user's risk profile and financial goals. The app also offers comprehensive financial tools and educational content to assist investors.

Groww

Groww is a versatile investment platform that offers both regular and direct mutual funds, as well as other financial instruments like Indian stocks, IPOs, and F&O. It provides access to a wide variety of mutual funds and is known for its user-friendly interface and educational content. Groww offers commission-free investment in direct mutual funds and has features like portfolio insights and comparison tools to help investors make informed decisions.

Paytm Money

Paytm Money is a well-known platform that offers both regular and direct mutual funds. It provides enhanced security and transparency for transactions, ensuring a worry-free investment experience. Paytm Money offers more than 2,000 mutual fund options from 40 houses, a SIP calculator, portfolio tracking, and direct plans for higher returns. It also provides market insights to help investors make informed decisions.

5paisa

5paisa is a safe and user-friendly platform that caters to traders of all levels. It offers a wide range of features, including mutual funds, stock market trading, IPOs, and more. 5paisa provides access to 9,000+ schemes and is registered with SEBI, CDSL, BSE, NSE, and MCX. While it offers comprehensive options, users may encounter a slight learning curve and occasional technical issues.

INDmoney

INDmoney is a one-stop solution for stock trading and mutual fund investments, offering a wide range of services. It provides a user-friendly interface and personalised financial guidance based on individual financial goals and risk tolerance. INDmoney offers various mutual fund types, such as equity, debt, index, and large-cap funds, and supports SIP plans for long-term investment goals. The platform ensures robust security protocols and detailed fund analysis for informed decision-making.

These online platforms offer diverse fund options, user-friendly interfaces, and informative tools to help investors make the most of their direct mutual fund investments. Each platform has its own unique features, so investors should consider their specific needs and goals when choosing the best platform for their investment journey.

Know Your Customer (KYC) Requirements

When considering which platform is best for direct mutual fund investment, it is important to understand the Know Your Customer (KYC) requirements. KYC is a standard in the investment and financial services industry to verify customers and understand their risk and financial profiles. This process helps to protect financial institutions against fraud, corruption, money laundering, and terrorist financing. It is also used to ensure compliance with anti-bribery regulations.

KYC typically involves three components: the Customer Identification Program (CIP), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD). CIP requires financial firms to obtain four pieces of identifying information about a client: their name, date of birth, address, and identification number. CDD involves collecting all of a customer's credentials to verify their identity and evaluate their risk profile for suspicious account activity. EDD is used for customers who are at a higher risk of infiltration, terrorism financing, or money laundering, and additional information collection is often necessary.

In the context of direct mutual fund investment platforms, KYC requirements ensure that advisors can verify a client's identity and understand their investment knowledge and financial profile before providing any financial recommendations. This helps to establish the essential personal profile of each customer and ensure compliance with all relevant laws, regulations, and rules of the securities industry.

For example, the Zerodha Coin app, which is a popular choice among investors in India, requires users to complete the KYC process by providing the necessary details and uploading documents before they can explore the app's mutual fund schemes. Similarly, other mutual fund investment apps such as ET Money, Paytm, 5Paisa, myCAMS, Kuvera, and Angel One, are likely to have similar KYC requirements as part of the account creation process.

By complying with KYC requirements, direct mutual fund investment platforms can help protect their customers and maintain the integrity of their financial services.

Cost Savings

Lower Expense Ratios:

Direct mutual funds typically have lower expense ratios compared to regular funds. This is because there are no distributor or broker commissions involved. Over time, these savings can be significant, resulting in potential cost savings for investors.

Higher Returns:

The lower expense ratios of direct mutual funds mean that more of the fund's returns remain with the investor, leading to higher overall returns. This is further enhanced by the fact that direct mutual funds do not have any intermediary distribution commissions, resulting in even greater cost savings and higher returns for investors.

No Intermediary Bias:

When investing in direct mutual funds, there is no potential bias from intermediaries like financial advisors or brokers. This means that investors can make decisions based solely on their research and preferences, ensuring that their investments align with their financial goals and risk tolerance.

Paperless Transactions:

Investing in direct mutual funds online often involves paperless transactions, reducing the administrative burden and environmental impact associated with traditional investment processes. This streamlining of the investment process contributes to further cost savings.

Instant NAV Updates:

Online platforms that offer direct mutual fund investments provide real-time Net Asset Value (NAV) updates. This allows investors to know the exact value of their investments at any given time, enabling informed decision-making and helping them to better manage their portfolios.

Diverse Fund Options:

Direct mutual fund platforms offer a wide range of fund options from different companies, providing investors with diverse investment choices to suit their financial goals and risk appetites. This diversity can help investors balance their portfolios and further reduce costs by spreading their investments across various schemes and asset classes.

User-Friendly Platforms:

Many direct mutual fund platforms are designed with user-friendly interfaces, making them accessible to both novice and experienced investors. This accessibility means that anyone with a smartphone and an internet connection can start investing, and the ease of use can help reduce the time and resources needed to manage one's investments.

Commission-Free Platforms:

Some direct mutual fund platforms, like Zerodha Coin, offer commission-free investing. This means that investors can save on the typical 1% to 1.5% commission fees charged by other platforms, resulting in substantial cost savings over time.

In summary, investing in direct mutual funds offers significant cost savings opportunities through lower expense ratios, higher returns due to the absence of intermediary commissions, paperless transactions, and user-friendly platforms that make it easy to manage your investments. These factors collectively contribute to a more financially rewarding and efficient investment experience.

Higher Returns

Direct mutual funds are a savings plan that allows you to save and grow your money for the future. They offer higher returns compared to regular mutual funds due to their lower expense ratios, as there are no distributor commissions involved. This means that more of the fund's returns remain with the investor, resulting in enhanced overall portfolio performance.

When choosing a platform for direct mutual fund investment, it is essential to consider factors such as user-friendliness, features, fees, and alignment with your financial goals. Here are some popular platforms that facilitate direct mutual fund investments, along with their key features:

Zerodha Coin

• No subscription, transaction, or commission fees for direct mutual fund investments.
• Access to over 2,200 mutual fund schemes from more than 41 asset management companies.
• Step-Up Systematic Investment Plan (SIP) feature for automatic increments of SIP amounts.
• Flexible SIP management allows users to easily start, pause, or stop SIPs and adjust amounts.
• Provides detailed consolidated statements, aiding in tax deduction claims.
• Offers a smooth user experience and a centralised demat account for convenient investment management.

Kuvera

• Completely free to use, with no subscription or commission fees.
• Access to over 5,000 direct mutual funds from various asset management companies (AMCs) across India.
• Offers a range of equity, debt, hybrid, and other types of mutual funds.
• Provides a goal planning calculator to help users track their financial goals.
• Allows easy import of existing portfolios from other platforms for seamless consolidation.
• Offers personalized investment recommendations based on a detailed analysis of the user's risk profile and financial goals.

Groww

• No subscription, transaction, or commission fees.
• Offers a wide variety of mutual funds, including equity funds, debt funds, and hybrid funds.
• Accessible via mobile app or website, ensuring convenience for users.
• Provides educational content, including historical performance data, risk levels, and fund ratings, to help investors make informed decisions.
• Smart Save feature allows investors to use Groww as an alternative to a savings account, with the potential for higher returns.
• Provides graphical representations of portfolio performance, helping investors track their investments and make adjustments.

Paytm Money

• Offers both regular and direct mutual funds with enhanced security.
• More than 2,000 mutual fund options from 40 houses.
• SIP calculator to help determine regular investment amounts.
• Portfolio tracking feature for real-time updates on investments.
• Direct plans for higher returns.
• Provides market insights to guide investment decisions.

5paisa

• Safe and user-friendly platform catering to traders of all levels.
• Offers trading and investing in mutual funds, stock market, IPOs, and more.
• Over 9,000 schemes available.
• Registered with SEBI, CDSL, BSE, NSE, and MCX.
• No commission for mutual fund investment.
• Cost-effective plans available.

These platforms offer a range of features and benefits to help you achieve higher returns on your direct mutual fund investments. Remember to consider your financial goals, risk tolerance, and investment preferences when choosing the platform that best suits your needs.

Frequently asked questions