Whether to invest directly or through a broker is the most recurring question people have in mind. In-fact, many professionals who have prior experience of invest, are also struggling with the same dilemma.
So you are not only person struggling to decide whether or How to Buy Mutual Funds Without a Broker !
Experts believe that in most cases, it is always preferable to deploy mutual fund assets directly rather than via an agent/broker. We will learn more about this in this article.
Before 2012, investors could only purchase and sell mutual funds via financial professionals such as brokers, money managers, and financial counselors. However, online investing platforms have turned us all into traders. Anybody with a computer, tablet, or smartphone may now purchase mutual funds easily.
All you need to know is where to purchase them, what kind of fund you want, and what fees, sales charges, and costs you may face.
So, let’s dive deeper into this article, and learn how to buy mutual funds without a broker.
Table of Contents
What exactly are mutual funds?
Mutual funds are professionally managed investments in which money is pooled from many fund managers and used to buy assets. Depending on the kind of mutual fund, it may invest your money in equities, debt, or a combination of equity and fixed-income securities.
Fund managers are experts who have a proven track record of managing investments and a thorough knowledge of the markets. The cost ratio, which is the yearly fee for managing the mutual fund, is charged by the fund companies.
You may invest in mutual funds directly via the AMC both offline and online.
How to buy mutual funds directly?
You may invest in different mutual fund schemes without paying any fees or commissions by purchasing the mutual fund’s direct plan.
To complete your KYC, go to the fund house’s branch and fill up the mutual fund application form, together with self-attested identification and residence evidence, and a passport-sized picture.
By accessing AMC’s website, you may invest in a direct plan of a mutual fund online. You may complete your KYC by uploading your PAN and Aadhaar information after filling out the mutual fund application form with necessary details such as name and bank details. Mutual funds may be purchased using your online bank account.
Mutual funds may be purchased via many online platforms such as Cleartax, Kuvera, Groww, ETMoney, Zerodha Coin, and many more.
Log in to any of the above platforms to invest and choose the mutual fund house from the list of fund houses. Select the mutual fund scheme depending on your investing goals and risk tolerance and click Out now. Select the amount you want to invest in the mutual fund scheme and the method as One Time or Monthly SIP.
Steps on how to buy mutual funds without a broker
It may seem a risky venture to explore things related to finance all by yourself, but all your time and effort is worth it!
Here are some of the steps on how you can buy mutual funds without a broker, they are:
- To purchase mutual funds from a mutual fund provider, you must first open an account, which may be done easily online.
- After you’ve decided on the fund you want to purchase, go to the fund company’s website and click the Open an Account option.
- You must answer the same questions as if you were opening an online brokerage account, such as your address and account type (individual or joint).
- You must also choose whether you want dividends paid into your account or utilized to purchase more shares of the fund from the mutual fund firm.
- The application may be completed online in approximately 20 minutes, or it can be printed and sent in.
- The majority of mutual fund firms provide automated investment plan (AIP) services. If you sign up for an AIP, the fund firm will deduct money from your bank savings or checking account every month.
- It’s a fantastic method to ensure that you’re consistently saving money. If you sign up for the AIP, some funds will even let you start with a lower initial contribution.
What is a direct mutual fund?
SEBI introduced direct plans to allow investors to purchase mutual funds without going via a middleman. Direct funds are mutual fund schemes that are provided directly by the fund company or AMC (Asset Management Company). In other words, no third-party intermediaries, such as brokers or distributors are involved.
There are no commissions or brokerage fees since there are no third-party agents engaged. As a result, a direct mutual fund’s cost ratio is lower. As a result, the cost ratio of direct plans is lower than that of regular funds.
Some of the bonus points which come in handy in a direct mutual fund are:
- Investors are not dependent on a third party to make investments.
- Direct money may be invested both online and offline.
- Because there is no commission to pay, the fund house will not charge a distribution fee, keeping the cost ratio low.
- There are no transaction fees.
What exactly are regular mutual funds?
Regular funds are mutual fund schemes that are distributed and marketed via brokers, advisers, and distributors. Regular funds include fees or brokerage costs since investors do not interact directly with the fund company. The commission is not paid directly to the agent by the investor.
Instead, it is collected by the fund house via the expense ratio and paid to the agent or distributor. As a result, regular funds have a somewhat higher cost ratio than direct funds.
Rather than figuring out how to buy mutual funds without a broker, you can invest in mutual funds via a broker. It is because the regular plan is ideal for investors who do not have the market expertise or the time to manage their portfolios.
Which is better: Direct or Regular mutual fund?
The same mutual fund manager manages both the direct plan and the regular plan. They also invest in the same assets. The main distinction is that under a regular plan, the fund company pays a commission as a distribution charge. There is no such commission or charge in the direct plan.
Even if regular plans seem to be more expensive than direct mutual funds. The little percentage of extra cost is worth making the correct investment choice. As a result, as compared to an ignorant incorrect choice, well-researched counsel may be more valuable.
So, let’s look at some of the key points which will help us in making decisions, they are:
Net Asset Value (NAV): The TER of any mutual fund plan is calculated based on the NAV. Because regular plan TERs are greater than direct plan TERs, direct plan NAVs are higher than regular plan NAVs. In other words, the value of your investment after you have made your purchase will always be greater in a direct plan than in a normal plan.
Market Research: In a direct plan, consider yourself as the sole person who will be making decisions and managing them single-handedly, contradictory to a regular plan.
Returns: As there is nothing we have to pay in the direct plan, the returns are higher. On the other hand, a regular plan involving a broker charges money and cost per transaction. Hence, the returns are unexpectedly low in the regular plan.
Role of financial advisor: Direct plans are designed for investors who do not need the assistance of financial advisers in mutual fund transactions. Online investing platforms of AMCs, as well as transactions through mobile applications, have simplified transactions for investors who want to invest in direct plans.
Aside from helping with transactions, financial advisers assist investors in making investment choices (such as whether to invest in equity, debt, or hybrid funds, which scheme to invest in, when to sell, and so on), monitoring investment portfolios, and so on.
Final Words !
After going through all the aspects, we can now conclude that whether it be a direct mutual fund plan or the regular one, every plan has its own advantages and disadvantages. Before engaging in investing activities, you should have a foolproof investment strategy that meets your financial objectives.
By far now, I hope that this article “How to buy mutual funds without a broker” has provided you some value worth your time.