How to invest directly in mutual funds – opinions on news from Equitymaster

November 4, 2025

As we enter the last quarter of 2025, the mutual fund scenario in India seems mature and dynamic. SIP inflows continue to rise above Rs 280 billion (billion) per month, and total mutual fund assets under management have crossed over Rs 65 trillion, reflecting deeper retail participation.

While benchmark indices like the Nifty 50 and BSE Sensex are hovering close to their record highs, the broader market is also reflecting mixed sentiment.

Some mid and small cap stocks are under pressure due to high valuations, while themes such as manufacturing, defense and PSUs are attracting investor interest.

In such an environment, investors are not just looking for returns, but are looking for smart ways to invest, save costs and have control over their portfolios. It is here that direct investing in mutual funds has emerged as a strong approach.

Unlike the regular route where distributors or advisors handle investments and earn commissions, direct investing allows individuals to manage their portfolios independently.

Direct plans have been the method of choice for financially conscious investors due to lower expense ratios, better transparency and fast-growing digital platforms.

If you want to take control of your investments and move forward in wealth creation in a much better way, here is a comprehensive guide on how to invest directly in mutual funds with updated tools, processes and tips relevant for 2025.

1. Understanding direct versus regular investment funds

Mutual funds in India come in two varieties: regular plans and direct plans. The fundamental differences between them lie in the method of access to investors and the associated costs.

Regular subscriptions are sold through distributors, relationship managers or other intermediaries who charge commissions, which are added to the fund’s total expense ratio.

A direct plan, on the other hand, is purchased directly from the mutual fund or from platforms registered with SEBI, without any intermediary.

Difference in expense ratio

The cost ratio for a direct subscription is usually 0.5-1% lower than that of the regular variant.

While this may seem like a small number, the impact this has on the long-term composition is significant. For example, an investment of Rs 100 that earns 12% annually for twenty years could grow almost Rs 30-40 through a direct plan.

Transparency & Control

In a direct plan, an investor selects funds, monitors performance and rebalances his portfolio. This works best for investors who can do their own research or follow reputable fund analysis platforms.

But direct investing also means responsibility for fund selection and monitoring, which may not be taken on by every investor without some basic knowledge.

2. Why direct investing is important in 2025

By 2025, investment fund investors will be better informed, digitally savvy and cost-conscious. Several market trends have made direct investing even more relevant:

• Increasing awareness: Following the COVID-19 crisis, retail investors have embraced financial literacy and online investing.
• Higher SIP flows: Consistent SIP contributions demonstrate confidence in long-term wealth creation, even during times of market volatility.
• Digital access: Fund houses, apps and registrars have simplified KYC, investment and redemption processes.
• Performance divergence: Because fund categories exhibit varying returns (for example, small caps underperform while large caps stabilize), investors prefer to have direct control over their portfolio rebalancing.

Overall, direct investing is in line with the shift towards self-managed, targeted investing in the maturing Indian capital market ecosystem.

3. Step by Step Process: How to Invest Directly in Mutual Funds

#Step 1: Complete your KYC

Make sure your Know Your Customer (KYC) is verified before investing. You can do this online through KRA (KYC Registration Agencies) such as CAMS, KFintech or NSE.

Provide your PAN, Aadhaar, photo and address proof – most fund houses complete eKYC through OTP based verification.

#Step 2: Choose a direct investing platform

You can invest directly via:

AMC websites: With any fund house (like HDFC MF, SBI MF, ICICI Prudential MF etc.), investors can create an online account and buy units directly.

RTA platforms:

• CAMS Online (myCAMS app/website)
• KFintech (KFinKart)

These provide consolidated access to multiple fund houses.

SEBI Registered Online Platforms:

• MF Central (by CAMS & KFintech)
• MF Utility (MFU)

These platforms facilitate consolidated direct transactions between AMCs.

Robo-advisory platforms: Some fintech apps also allow investors to transact in instant plans, while offering tools for tracking and targeted investing.

#Step 3: Select the correct fund categories

Based on your objectives and risk tolerance:

• For stability: Large Cap or Flexi Cap funds
• For growth: Mid/Small Cap or Multi Cap funds
• For long-term wealth: Shares of ELSS funds (for tax savings)
• For short-term goals: Debt or cash

Evaluate performance consistency, fund manager track record, expense ratio and risk metrics such as the Sharpe ratio or standard deviation.

#Step 4: Determine the investment mode – SIP or Lumpsum

SIP (systematic investment plan): Ideal for disciplined long-term investing, especially in volatile markets.

Package: Suitable if you have excess funds and the markets are reasonably valued.

#Step 5: Regularly track and review

Once invested, monitor the fund’s performance quarterly or semi-annually. Compare your returns against category benchmarks and industry peers.

If a fund consistently underperforms or deviates from its mandate for more than a year, you may want to consider switching to another fund.

4. Best platforms for direct investing (2025)

By 2025, direct investing has become seamless with digital platforms offering intuitive dashboards, analytics and paperless processes.

Some of the leading options include:

• MF Central: A unified platform backed by SEBI to view and manage all your mutual funds.
• myCAMS & KFinKart: Registrar supported apps that enable transactions between multiple AMCs.
• MF Utility (MFU): Offers a “Common Account Number” (CAN) for managing investments in more than 40 fund houses.
• Other online investment platforms: Enable investing in instant plans with portfolio analysis and goal tracking features.

These platforms have replaced traditional distributor-led channels by offering transparency, lower costs and superior convenience.

5. Things to consider before investing directly

• Understand the fund’s objectives: Do not invest solely based on past returns, but in line with your time horizon and objectives.
• Avoid over-diversification: Holding too much money leads to duplication and tracking issues.
• Stay consistent: SIPs work best when they progress through market cycles and are not timed based on sentiment.
• Annual evaluation: Make sure your portfolio still matches your objectives and risk profile.
• Tax implications: Consider capital gains tax: 10% on LTCG (above Rs 1 lakh) for equity funds, and 20% on indexation for debt funds.

Is direct investing for everyone?

Direct investing is most suitable for investors who:

• Comfortable to analyze funds yourself
• Disciplined in monitoring portfolio performance
• Aware of the fundamental risk-reward dynamics

If you are investing for the first time or prefer guidance, you can only consider a SEBI registered investment advisor. The cost savings from direct plans only make sense if you make well-informed fund choices.

Should you consider immediate plans?

As capital markets in India are gradually developing, investing directly in mutual funds is not just about saving on certain costs but also reflects the maturity of investors who have taken their financial goals into their own hands.

In 2025, when market valuations appear to be uneven across sectors and investors shift from short-term gains to wealth preservation and disciplined growth, direct mutual fund investing offers both transparency and empowerment.

Unlock the maximum potential of mutual funds without the middleman and without excessive costs eroding your returns by using SEBI-backed digital platforms, reviewing your investments from time to time and tailoring your portfolio to your own life goals.

Remember, good investing is not a trend to chase. It’s about building clarity, consistency and conviction. And with direct investing, you have the tools to do just that.

Disclaimer: This article is for information purposes only and does not constitute any investment advice or recommendation to buy/hold/sell any fund. The returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you must choose the right fund to achieve your financial goals. If you are unsure about your risk tolerance, please consult your investment advisor/advisor. Investments in mutual funds are subject to market risks; read all fund-related documents carefully. Registration granted by SEBI, registration as IA with Exchange and certification by NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.