When it comes to investing, the age-old tradition among investors is to seek the help of a financial broker who will take care of the nitty-gritty of the process. But the times have changed and a trend among young investors these days is to invest directly with an AMC. That way, you do not have a third party interfering in your investment decisions.
If you have never been told that you can invest in mutual funds without the help of a broker or an agent, then this might have come as a surprise to you. If you have always taken help from a financial advisor, this article will tell you how to break free from the unnecessary tradition of paying a broker to invest in mutual funds.
How to Buy Mutual Funds without a Broker?
There are two different ways to invest in mutual funds: direct plan and regular plan. Popular until now, a regular plan involves going to a broker or an agent and paying them a commission to become invested.
Direct plan is when you go to the website of the mutual fund or an online platform that allows you to invest in the mutual fund of your choice. Here the procedures are minimal and are completed online in a matter of minutes.
Bear in mind there is no difference whatsoever between these two in terms of investment made. A person who invests through regular gets the same shares in the same fund under the same AMC as a person who invests directly. The difference lies in the amount paid as commission, which may vary for regular plans and is zero for the latter.
What are the Benefits in Investing Directly?
Direct plans were introduced in 2013 under the instruction of Securities and Exchange Board of India (SEBI). The order made it mandatory for every Asset Management Company (AMC) to include a choice of direct investment in mutual fund for investors.
There are several other benefits to investing in a direct plan as opposed to a regular plan:
No commission – The benefit of investing in mutual funds without brokerage is that you save a considerable amount of money that is otherwise spent as commission. Usually, the broker, agent or the distributor is paid either by the investor or the company.
Higher returns – Not having to pay commission will cut down the expense and increase your returns.
Transparency – You will know where your money is at all times, and there is no threat of being conned by fraudulent distributors and agents.
Freedom – You are free to choose where you want to put your money without anyone trying to influence you. As there is no commission involved, there is no bias, and you are free to act according to your convictions.
Benefits of Regular
On the other hand, regular has its own benefits too.
Financial Advice – A regular plan comes with free financial advice from the agent who has many years of experience in the field.
Convenience – Investing directly in mutual funds without a broker makes it necessary for you to do the research which is done by the agent in case of regular plans. This is especially convenient for a busy person. However, this comes at a price that could be avoided.
A major disadvantage that people usually talk about is that when you invest directly, you are likely to make more mistakes out of lack of experience or understanding. But this is an outdated argument because now a days, mutual fund platforms like Grow have features like performance tracking, informative videos and assistance in financial decisions. Such platforms are hassle-free and easy to use from the convenience of your phone. There is an added advantage of being able to understand how to handle your investments rather than putting the responsibility on someone else.