Investing into mutual funds? Should you buy directly from AMC, or opt for an aggregator instead | Mint (2024)

FAQs

Investing into mutual funds? Should you buy directly from AMC, or opt for an aggregator instead | Mint? ›

Experts suggest that notwithstanding the ease and comfort offered by aggregators, it is advisable for retail investors to buy mutual fund units directly from an AMC. This is considered safe, and brings higher yield on investment at the same time.

As there is no commission associated with it, investing in a direct fund is quite lucrative and helps you to maximise your mutual fund gains. However, if you do not have adequate knowledge of mutual funds, you can consider investing in a regular plan through an intermediary.

One prominent example of an Asset Management Company (AMC) in India is HDFC Asset Management Company Limited (HDFC AMC). Established in 1999, HDFC AMC is a leading player in the Indian mutual fund industry.

Direct mutual funds typically have a higher NAV due to their lower expense ratio. This lower expense ratio in direct funds allows a larger portion of your investment to actively generate returns, potentially leading to higher overall returns compared to regular funds with higher expense ratios.

AMC SIPs promote the habit of regular investments to achieve the goal of wealth creation in the long term. Given their flexibility both in terms of amount and duration, AMC SIPs grow on the power of compounding and lead to substantial wealth accumulation over time.

When you buy the mutual fund units directly from the portal of an asset management company, you stand to earn a higher return because these are direct schemes, and do not involve any brokerage. Moreover, there is no scope of misappropriation of funds because you are transacting directly with the fund house.

All in all, before investing in any mutual fund scheme managed by an AMC, greater focus should be given to the relevant parameters of the particular scheme itself. Evaluate whether the goals, magnitude of risk, industry, and asset focus of the MF scheme align with your needs as an investor.

Visit the AMC Website: Go to the official website of the Asset Management Company that manages the mutual fund you are interested in. Create an Account: Look for an option to create a new account or log in if you already have one.

What is the disadvantage of direct mutual funds? ›

Risk: Direct plans can carry higher risk as investors need to research and manage their investments independently, without the guidance of financial advisors.

One main attraction of direct funds is that investors will not have to pay commission. In the case of regular funds, the fund house adds your advisory charges to the expense ratio. If you are a market-savvy investor with a keen interest in finance, then direct funds can be the right choice for you.

Mutual funds pose relatively lower risk than direct stock investing due to diversification. Shares have a higher level of risk compared to mutual funds. The debate of the stock market vs mutual funds is never-ending. You should know the pros and cons of both these options before choosing the right one for you.

Basically both are same except - In AMC SIP, you cannot edit the monthly payment to step up or step down. Asset Management Company (AMC) decides the minimum payment for AMC SIPs. In Normal SIP, you have the option to pause and edit the amount you pay whenever we want.

AMC is seeing much improved relative strength. The 3, 6 and 12-month Relative Strength Ratings currently stand at 96, 94 and 68, respectively. The Relative Strength Rating runs from 1 to 99; for investors selecting top growth stocks, the higher the RS Rating, the better the stock in general.

It is not necessary to have a Demat account to invest in mutual funds. You can choose to invest in mutual funds through a regular mutual fund account. However, a Demat account for mutual funds offers advantages such as centralized portfolio management and the ability to hold various securities in one place.

They come with many advantages, such as advanced portfolio management, risk reduction, and dividend reinvestment; however, there are many disadvantages to consider as well, such as high expense ratios and sales charges, tax inefficiencies, and possible management abuses.