There are two types of mutual fund plans you can invest in - regular and direct. Approximately 45% of mutual fund investors buy direct mutual fund plans while 55% invest in regular mutual fund plans.
Regular funds are popular because you can buy them from investment apps that offer perks like curation, portfolio tracking, and analysis. Direct funds, on the other hand, are cost-effective yet research-heavy.
Either way, if you’re looking to switch between regular and direct funds, you’ve come to the right place. We’ll walk you through the process and explain whether it’s worth switching between the plans.
How To Switch From Direct to Regular Mutual Fund Plan?
You can switch from direct to regular mutual funds online and offline. The online mode is suitable for those who don’t want to physically travel to an AMC, Karvy, or CAMS branch.
The offline mode is apt for traditional investors who prefer to manually fill things out on a piece of paper (form).
1. Switching From Direct To Regular Funds Online
You can visit the website of an AMC or a transfer agency like Karvy and CAMS. Navigate to the “Switch Transaction Form” on any of these websites.
Fill in the details like the direct mutual fund plan you’re currently invested in and the regular mutual fund plan you want to “switch to”. You’ll also have to mention other details like the folio number and units.
Here’s an example of the switch form on CAMS:
The switch will happen after 3 to 5 business days. You’ll be able to view the change in the portal or app that you’re using for tracking your mutual fund investments.
2. Switching From Direct To Regular Funds Offline
The offline mode of switching between direct and regular funds would require you to travel to the nearest AMC, Karvy, or CAMS branch. Get the switch form and select “Switch to” followed by regular funds.
You’ll need to mention details like the folio number, fund name, units, and more. The account statement will be delivered to you online and offline once the switch is complete. It can take 3 to 5 business days.
Advantages Of Switching From Direct To Regular Plan
Regular mutual funds are ideal for passive investors and busy professionals who do not have the time to analyse the market. Broadly speaking, these are the benefits of investing in regular funds:
Curation: An expert will help you access a handful of top-performing mutual funds
Tracking: You’ll be able to view all your investments in one place
Monitoring: Active portfolio management and advice on when to re-allocate your investments
You’ll pay a marginally higher expense ratio on regular funds but that’s better than investing all your hard-earned money in the wrong direct mutual fund.
How To Switch From Regular to Direct Fund?
The process of switching from regular to direct funds is more or less similar to the steps mentioned above. However, there’s one key difference, as you’ll see.
1. Switching From Regular To Direct Funds Online
Have details like your folio number and mutual fund details handy and visit the website of the AMC in question or Karvy/CAMS. Access the switch form, enter the details, select “switch from”, and submit it.
Here’s an example of ICICI’s online mutual fund switch form
Generally, it takes approximately 3 to 5 business days for the switch from regular funds to direct funds to reflect.
2. Switching From Regular To Direct Funds Offline
Visit the branch of an AMC, Karvy, or CAMS and get the switch form. Get the switch form and fill in the details to set things in motion. Once the switch is complete, you’ll get a statement from the AMC.
Advantages Of Switching From Regular To Direct Plan
These are the benefits of switching from regular to direct mutual funds:
Low expense ratio: No commission fees implies that there’s a lower expense ratio
More Units: You’ll get more units of a direct plan than a regular plan of the same mutual fund due to the low expense ratio
It’s important to note direct funds were originally meant for seasoned investors. If you’re a new investor, it’d be wise to speak to a trained Wealth Coach before investing in direct or regular mutual funds.
Why Switch Between Regular And Direct Plan?
Investors are known to switch between regular and direct mutual funds in order to cut costs. Now, costs here could mean two things:
Financial: Fees, expense ratio, etc.
Opportunity: Investing in the wrong mutual funds
Other than that, it also depends on the type of investor you are and the level of investment advice you need to achieve your goals. If you have planned to switch between mutual fund plans, remember:
You’ll have to pay tax because switching between regular and direct implies selling and buying units of a mutual fund
There may be an exit load depending on the type of mutual fund you’ve invested in
The effort involved in switching between mutual fund plans is high. That’s why it’s best to consult a trained Wealth Coach before investing in any mutual fund scheme.
Watch this video to know why you shouldn’t pick mutual funds on your own
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