A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
How to invest in direct plans
Mutual funds may seem easy to some, while others may find it complicated to understand. New investors may not fully understand how a mutual fund works and what kind of risks it faces. Since there are over thousands of mutual fund schemes available in the market today, such investors may find it difficult to choose some funds that suit them best.
However, there are many investors who are familiar with the market and various investment products that invest in market securities such as mutual funds. Such investors would have enough experience in investing in mutual funds or would have done a detailed study of the topic. These investors have a fair idea of how mutual funds work, their categories and subcategories, the risk-return trade-off in these funds, and their investment strategy. They can do their own research to select a handful of schemes to invest in and monitor their investments. Such investors can invest in the direct plans of mutual funds. For them, it makes perfect sense to invest in the direct plan because they have the confidence to manage their selection of schemes, and direct plans have lower expenses than regular plans.
To invest in direct plans, you can visit the office of a mutual fund to submit an application or invest directly on its website. Investors can invest in direct plans through a mutual fund aggregator or the mutual fund registrar’s site. Whether it’s a regular plan or a direct plan, investing in mutual funds is very easy!