October 24, 2021

What is free-float market capitalization?

Oct 19, 2021

The stock market today has a variety of investment avenues that suit the varied interests of different types of investors. Before diving head-first in stock market investments, it is imperative to understand the terminologies associated with an investment that could help you make better decisions. One such term that could guide your future investment decisions is free-float methodology in market capitalization.

Market capitalization stands for measuring the company’s outstanding shares multiplied by the price of each share. For instance, a company with 20,000 outstanding shares at Rs. 20 each will have a market capitalization of Rs. 4,00,000. In this standard calculation of market capitalization, the total number of shares, including private and public, is considered to arrive at a value. However, in free float, also known as float-adjusted capitalization, only publicly held shares are considered. Shares owned by promoters, trust and government bodies are excluded, which also means that actual market capitalization would always be higher than the free-float market capitalization value.

Free-float market capitalization is inversely proportional to market volatility. Since there are a limited number of shares, which can be bought or sold, fewer trades move the prices significantly. This is the main reason why investors prefer dealing with shares having higher free float, which, in turn, allows them to buy and sell shares without affecting the index’s overall prices.

Let’s understand through this example – ABC Ltd has 80,000 outstanding shares priced at Rs. 20 per share. Out of this, 30,000 shares are held publicly while the rest are privately owned.

  • The market capitalization of ABC Ltd:

Total outstanding shares × price of each share

80,000 × Rs. 20 = Rs. 16,00,000

  • Free-float market capitalization for ABC Ltd:

Publicly owned outstanding shares × price of each share

30,000 x Rs. 20 = Rs. 6,00,000

 Coming to the advantages of free-float methodology over total market capitalization:

  • When it comes to judging the true picture of a security, experts tend to rely on the free-float method as it considers the shares that are available for trading in the market, which represents an accurate reflection of market movements.
  • Many times, companies achieve large caps, but most of their shares remain privately locked, failing to present a true picture of their shareholding pattern. Indices in the market, which are performance trackers, are influenced by either price or market capitalization. With free float, it is possible to do broad-based indexing.
  • This technique could help investors in deciding the stocks to buy today by distinguishing companies whose shares are available in the market for trading.
  • Free-float market capitalization can also help in determining the float factor. For example, a company has 55,000 outstanding shares, out of which 16,000 are open for trading and 39,000 are closed. Each share is priced at Rs. 43. Therefore, the proportion of shares available for trading is 16,000/55,000 = 0.29. This is the float factor, which is assigned to each share price.

Investing in the stock market could be easy if you have the right tools and guidance to navigate through it. If you do not have the bandwidth to undertake thorough research and analysis, seeking expert could be a wise choice. A financial expert can curate bespoke stock investment plans based on your appetite for risk, investment horizon, and financial goals.

Reach out to one today to make smart investment decisions!

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Things You Must Consider Before Buying Guaranteed Insurance Plans

Oct 12, 2021

We begin building certain goals and dreams for ourselves and our loved ones as we go through life. However, achieving our goals can be difficult at times, as they may require a decent amount of financial support. Therefore, it is important to take the appropriate steps towards achieving our financial goals.

Opting for a guaranteed return insurance plan will be the most optimal way to get financial assistance out of the different products available.

What is a Guaranteed Return Insurance Plan?

Life insurance plans with guaranteed returns are a type of insurance policy that offers the dual benefit of insurance coverage along with guaranteed returns. With the guaranteed return plan, you can simultaneously protect your loved ones and build for your financial goals.

In this plan, you will have to pay the insurer’s premium to maintain the policy active. The premium is split into two parts. The first part is kept for insurance coverage, and the second part is kept for investments.

If you pass away before the plan reaches maturity, your loved ones will get insurance coverage. However, if the plan reaches maturity before you pass away, you will get the guaranteed returns through the plan. Different insurers offer different payout options.

Factors You Should Consider Before Buying Guaranteed Insurance Plans:

  1. The suitability of the plan:

If you’re planning to purchase a guaranteed return insurance plan, you must ensure the purchase will be suitable for you. The guaranteed return plan will help you achieve your financial goals and protect your loved ones at the same time. Therefore, if you’re looking for ways to achieve your financial goals like your child’s education, your vacation abroad or getting a new house, the guaranteed plan will be an optimal solution.

  1. Different variants of guaranteed plans:

If you’ve decided to purchase a guaranteed return insurance plan, you can look through the variants available for you. All the variants are designed to help individuals meet their unique investment and insurance objectives. When you have a decent idea about the different variants of the guaranteed plans available for you, you will be able to make an informed decision.

  1. Features of the guaranteed plan:

Your insurance plan must match your current income, risk appetite, current life stage, etc. In addition, the plan you choose must offer you the flexibility to pay the premiums as per your requirement. Therefore, you must look through the different plans available to ensure you opt for a plan that matches your suitability. Insurers also offer insurance calculators to help customers understand life insurance quotes. It can help you compare the different plans available for you. While conducting the research may be hectic, it will be beneficial once you find the most suitable plan.

  1. Your insurer’s reputation:

The insurer you choose for your insurance plan must be able to help you at a time you need the insurance coverage. Therefore, it is important to look through your insurer’s reputation online before purchasing the plan. Many insurers like Tata AIA life insurance provide information about their plans, coverage, claim process and claim settlement ratio online to help customers. This way, you can learn about whether the insurance claim you file will be settled or not.

  1. Correct circumstance for the guaranteed plan:

If you’re planning to purchase guaranteed insurance plans in India, it would be optimal if you began the investment a bit early or at a young age. Purchasing the policy at a young age gives your investment a longer horizon to be held in the market, which will help you build your financial corpus through the investment.

Conclusion

Thus, opting for a guaranteed return insurance plan can be quite helpful to achieve your financial goals and protect your loved ones simultaneously. However, if you’re planning to purchase the guaranteed return plan, you must consider certain factors before making the purchase. Following these factors will help you purchase the most optimal plan for yourself.

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Factors to Consider Before Opting for a Home Loan Balance Transfer

Sep 30, 2021

A home loan balance transfer is an excellent facility offered by the financial organisation that eases the repayment burden for home loan borrowers. Read on to know more about it.

A home loan balance transfer is the process of moving your home loan from the existing lender to another one and repaying the outstanding amount at a lower interest rate.

If you have taken a home loan, and your lender is charging you a high interest rate, you can avert paying a high EMI by choosing the home loan balance transfer option. However, before you go for the balance transfer, you must consider a few essential things.

  • Negotiate the interest rate

Before exercising the option to do balance transfer, it is better to negotiate with the existing lender to revise your interest rate. Suppose you have a loyal association and have a long-term relationship with them and have paid all the EMIs on time. In that case, the lender may consider your request based on your credit history and past repayment track records. This way, you can lower your EMI burden without paying any charges associated with the balance transfer.

  • Check your credit rating

Your credit score plays a vital role in determining if you are eligible for the balance transfer or not. If you have paid all your EMI previously on time, your credit score must be high. However, if you have been inconsistent with your dues, it would reflect poorly on your credit score.

So, before you opt for the balance transfer, ensure to pay off your previous dues so that your credit score is high and you can complete the transfer process without any hassles.

  • Be wary of the remaining loan tenure

Opting for a home loan balance transfer during the latter half of the tenure may not be worth it. If you have only a few years to pay off the existing loan, you may have already paid off a significant portion of the interest payable during the initial years. In this case, refinancing the home loan may not be a wise decision as you may end up increasing the interest cost on your new loan. So, it is better to use the home loan balance transfer calculator to compute the interest payable on the new loan before taking the final borrowing decision.

  • Term and conditions of the new loan

Lastly, you must be aware of the term and conditions of the new loan. Make sure that you read the fine print carefully before you sign the home loan balance transfer papers. While the idea of repaying the balance amount at lower interest may seem enticing, you must fully understand the terms and conditions. You must refinance the home loan only if the terms and conditions are beneficial to you.

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Home loan VS home construction loan

Sep 24, 2021

The home loans are the ones that are taken for the purchase of the flat or the row house from the real estate developer. While as the home construction loans are the loans that are taken by the individual for the construction of their homes on their individual plot. The interest rates charged for both the purpose are same and thus are considered as similar kind of loans. The home loans can be availed at an interest rate as low as 6.50% per annum. The home loans can be availed by the borrower from any of the banks irrespective of he/she has a bank account at any of the banks. Ideally, the bank which has got a good reputation in the markets and the ones that charge the lowest interest rates and processing fees should be taken into consideration while applying for the loans. The individual borrower should have a good credit score while applying for the loans. The bank expects a minimum score of 700 points for the application of the loan to get approved. The home loans interest rates are reducing on a gradual basis as and how the repo rate of the RBI is getting reduced.

The home construction loans can be availed 80% of the project cost including the interiors of the house. The bank requires proper income proof for the disbursement of loans. An independent bungalow can be constructed on the plot by availing of loans. The project cost is estimated by the bank officials and accordingly, only the loans can be approved for an individual. If an excess of the amount is demanded by the applicant beyond the basic project cost the bank may reject the loans of the borrower. The home loans when purchased as a ready possession flat or a ready possession row house then in that case the total cost including the land cost and the construction cost is taken into consideration and accordingly the loan amount is approved. The home construction loans are approved only if the applicant has a plot of their own with clear titles then in that case home construction loans are approved. The home construction cost is estimated according to prevailing rates going on of the construction contractor and according to the FSI approved by the town planning authority. The housing construction loans are approved on similar conditions as the ones for the home loans.

Benefits of home loan:

  • The borrower can claim tax benefits under income tax 80C on the principal amount and section 24 under the interest repayment. The borrower can continue to avail of tax benefits as long as the tenure extends for the loans.
  • Availing loans can help individuals keep their existing savings locked into financial instruments and repay the loans from the running income.
  • The loans help the borrower repay loans for a longer span of time as long as 30 years, depending upon the age of the applicant.
  • For the first time, home buyers can avail subsidy of Rs.2.67 lakh from the PMAY scheme being launched by the government.

Difference between home loans and home construction loans:

  • Though the interest rates charged by the bank for home loans and home construction loans are the same, the home construction loans are charged a bit lower charges than the home loans.
  • The total loan amount in the case of home loans is calculated on the construction cost and also the cost of the land. While as the home construction loans the land cost is excluded and only the home construction cost is included for the approval of loans.
  • Home construction loans can be availed only if the individual has his own plot. While the home loans can be availed even in case of an individual not having their own plot.
  • The home loans are approved based on the total cost irrespective of the transaction value. While as the home construction loans the cost of the construction
  • The home loans can be disbursed by the bank at one go. While the home construction loans can be disbursed only in part installments as and how the progress is there of the construction of the house.
  • The home loans can be approved for a longer tenure while the home construction loans can be approved for a shorter tenure.
  • The documentation required for the home loans is different from that of the home construction loans.
  • The limit up to which the home loans can be approved is higher depending on the locality in which the property is purchased. While in the case of home construction loans the cost of construction is similar at any location only the minor variation can persist thus the number of loans approved can be lower compared to home loans.

Availing the home loans or home construction loans totally depends upon the situation of the individual. If the individual owns a plot then home construction loans can be taken while as in case if the individual does not own the plot then case home loans can be taken. The interest rates charged & other conditions of the loans are one and the same while there could be minor differences in the interest rates and processing fees been charged by the lenders.

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How to claim Insurance Benefits under PMJJBY & PMSBY Govt Insurance Schemes?

Aug 24, 2021

For those who might already be contemplating term insurance plans, it is important to note that the Indian government already has certain setups and schemes in place, targeting the sudden demise of the insurer.

Better segregated as PMJJBY and PMSBY schemes these govt.-backed facilities allow you to insure your family against untoward mishaps and that too at highly affordable rates. In the subsequent sections, we shall talk about the best ways to approach and achieve insurance benefits, under the mentioned schemes.

More about the PMSBY Scheme

Here is a reliable government-backed insurance scheme that covers you for disability and even accidental death. Plus, any individual between 18-70 years can opt for this insurance scheme, which attracts a yearly premium of Rs. 12. When it comes to the insurance benefits, the family of the insured would get Rs. 2 Lakhs, as an immediate death or accidental-induced permanent disability benefit.

Also, in case of a partial disability, the insured gets Rs. 1 Lakhs as the PMSBY insurance benefit.

More about the PMJJBY Scheme

Getting the Pradhan Mantri Jeevan Jyoti Bima Yojana benefits is a bit more straightforward as compared to the PMSBY. While the yearly premium is still on the lower side at Rs. 300, it is more of a strict life insurance policy and not an accidental scheme, like the PMSBY. This means, even if the insured dies of a natural cause, the family will still get Rs. 2 Lakhs, as a benefit.

Also, the age limit for the same is slightly lower as compared to the PMSBY as the upper age limit is set at 50 years.

How to Enroll for the Schemes?

In case you want to reap the benefits of the mentioned term insurance schemes, offered and nurtured by the government, it is necessary to take note of certain factors.

Firstly, the premium will be directly debited from your savings account, provided your bank accommodates the same. Also, even if you have multiple savings accounts in place, these plans can only be linked with one. This means, one insurer can only procure this benefit one time.

Also, each plan automatically terminates once the maximum expiration age is attained. Not just that, the premiums you pay for the schemes are also eligible for tax benefits. Plus, the best thing about Pradhan Mantri Jeevan Jyoti Bima Yojana and even the PMSBY scheme is that neither of the policies lapses if the holder cannot pay certain premiums. The schemes can be reinstated instantly upon payment of the pending premium dues.

Final Words

You can search for the PMJJBY and PMSBY schemes by heading over to the Finserv MARKETS. However, if you want a term plan that offers a bigger sum to the beneficiary, this platform also lets you compare and contrast the existing choices.

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Can an NRI open a joint account with a resident of India?

Aug 19, 2021

Non-Resident Indians are those persons who are Indian citizens but are living abroad due to various reasons. Most NRIs have families or relatives back home who partly manage their financial affairs in India. For example, if Mr Khanna is employed in Dubai, but his wife and children are living in India, then his wife will be in a better position to manage finances on the Indian side like paying or receiving rent, withdrawing funds, operating bank accounts etc.

Therefore, the question arises, is it possible for an NRI like Mr Khanna to hold a joint account in India with an Indian resident, who in this case is his wife? Up until 2011, this was not possible.

However, now an NRI can open joint residential savings account with an Indian resident on an ‘either-or survivor’ basis, under certain conditions. A joint account with an NRI can also be an NRO account.

As far as an NRI holding an Indian bank account on his own is concerned, it is still not allowed and attracts a penalty.

Joint Residential Savings Account with an NRI

So how does a joint account with an NRI and resident Indian work? Given below are the conditions in which this is possible.

– A joint residential savings account can be opened between an NRI and an Indian resident, provided that the Indian resident is a relative. A relative, in this case, can mean parents, siblings, siblings’ spouses, children, own spouse, children’s spouses, grandparents, grandchildren and spouses of grandchildren.

– All the rules and regulations applicable to a normal savings bank account in India will be applicable to such a joint account as well.

– The bank keeps all the relevant documentation with them, including a record for the need of a joint account. A signed declaration is also taken from the NRI indicating that they will not use the funds in the account in violation of the FEMA Act and will be responsible for the repercussions in case a violation does occur.

– The NRI account holder cannot deposit any money in the form of cash, cheque, remittances or direct credit into such an account.

– The money from this joint account is not repatriable, which means it cannot be transferred outside India.

– The resident Indian will be the primary account holder of the joint account. The NRI will remain the secondary holder.

– Such a joint account can be used to make payments by the resident account holder.

– In case the resident account holder passes away, then the NRI will become the sole holder of the account, but the account will be converted into an NRO account.

Joint NRO with an NRI

An NRI can also jointly hold an NRO or Non-Resident Ordinary account with a resident in India. However, such an account can only be opened on the ‘former or survivor’ basis.

Final Word

Thus, an NRI can hold a joint account along with a resident relative if the above conditions are met. This can either be a normal residential savings account or an NRO account as well. If an NRI wishes to hold an account in India as a sole account holder, then there are other options like an NRO account, NRE account or an FCNR account.

To open a joint savings account with an NRI, the account holders can visit the concerned bank along with relevant documentation and declaration as required by the bank and follow the bank’s protocol.

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All about PMAY (Pradhan Mantri Awas Yojana) – Key Benefits & Features

Aug 19, 2021

Dedicated to providing housing for Indians in both rural and urban areas, the Pradhan Mantri Awas Yojana (PMAY) was launched by Prime Minister Narendra Modi in June 2015. Pradhan Mantri Awas Yojana is a housing scheme where the beneficiary can get a home loan interest rate subsidy if he/she wishes to extend, construct or purchase a house. This credit-linked subsidy scheme is aimed at providing affordable housing for all by 2022. In case you are planning to buy a home, it is important to know the features and benefits of the PMAY scheme in order to boost your investment decision.

Features of PMAY

  • Pradhan Mantri Awas Yojana is categorised into two parts – Pradhan Mantri Awas Yojana (Urban) and Pradhan Mantri Awas Yojana (Gramin)
  • To avail the benefit under this scheme, the beneficiary should not own a ‘pucca’ or concrete house.
  • The beneficiary family would include husband, wife and unmarried sons and daughters.
  • The applicant family would have to provide their Aadhaar number while applying for the home loan under this scheme to avoid duplication.
  • The applicant can apply for a home loan under PMAY through any lending institution like banks, non-banking financial companies, rural banks, housing financing companies, etc.
  • The subsidy available under this scheme is up to 6.50% of the loan amount for a tenure of up to 20 years.
  • The benefit of the scheme can be availed across all urban areas in 4041 statutory towns in India.
  • Under this scheme, the houses are being constructed using eco-friendly raw materials. Moreover, they are designed to withstand natural calamities.
  • The interest subsidy is available for people belonging to categories of Economically Weaker Sections (EWS), Lower Income Group (LIG) and Middle Income Group (MIG – I & II).

The credit-linked subsidy scheme for the different categories is tabulated below –

Category Annual income Rate of interest subsidy Maximum loan amount Carpet Area of the house
Economically Weaker Sections (EWS) Rs 3 Lakh 6.50% Rs 6 lakh 30 Sq. Mtr.
Lower Income Group(LIG) Rs 3 lakh – 6 lakh 6.50% Rs 6 lakh 60 Sq. Mtr.
Middle Income Group –I (MIG) Rs 6 lakh –  12 lakh 4% Rs 9 lakh 160 Sq. Mtr
Middle Income Group – II Rs. 9 lakh – Rs 18 lakh 3% Rs 12 lakh 200 Sq. Mtr.

Benefits of PMAY

  • Women empowerment

PMAY scheme aims to help women participate in the financial decision-making of the family. To avail this scheme, it is mandatory for a family to have a woman as the owner or co-owner of the house.

  • Housing for all

The housing scheme is for people living in both rural and urban areas of the country. Moreover, there are preferential provisions for salaried women, disabled individuals, minorities like scheduled castes and scheduled tribes, widows, transgender people etc. In addition, if you are a senior citizen you can also expect to get ground floor accommodation under this scheme. PMAY also aims at accelerating slum rehabilitation by providing affordable housing and eco-friendly homes to first time home buyers.

PMAY is a positive approach of the Government to provide affordable housing for all. It will not only help people with low purchasing capacity to live with dignity in their own homes, but also contribute to slum rehabilitation. If you have been planning to buy a house, this could be the best time to do so under the PMAY scheme. Make sure to check your eligibility for PMAY and apply for a home loan today!

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4 mistakes to avoid while taking a loan in Singapore

Aug 16, 2021

Taking a loan in Singapore has become a way of financial management for most of the people nowadays to ease their financial woes. And to make matters easy for you, there are several moneylenders in Singapore who offer a low interest loan at attractive terms and also work out the best possible payment terms for you. If all goes well, you can get a fast loan in Singapore without any collateral as long as your credit score is good.

 

A good credit score is very important while applying for an instant loan in Singapore. It indicates that you have a stable financial life and a good repayment track record. A high credit score is a key factor for obtaining a loan in Singapore and licensed moneylenders or banks might even reject your application for cash loans if you have a poor credit score. Credit score not only helps in assuring moneylenders that you would repay the loan on time, but also in helping you get the best low interest loan.

Honestly, chances of you getting that urgent loan can be few if you don’t get the right guidance on time.  In this article, let’s now take a look at the 4 mistakes to avoid while taking a loan in Singapore:

Not paying your existing loans and credit cards on time: Failure to repay your loan EMIs or credit card payments on time is bound to affect your credit score adversely. This might cause an obstacle when you apply for a loan in Singapore. Similarly, not repaying your credit card dues on time will also cause a problem while applying for money loans.

A very high debt-to-income ratio: One of the most important elements of maintaining good financial health is to keep track of one’s debt-to-income ratio.  The calculation is easy and you just need to divide your monthly EMIs and debt repayments by your monthly take-home-salary. The lower the number obtained is, the better it is. For instance, if you have a monthly loan burden of $1000 and a salary of $5000, your debt-to-income ratio would be 0.2, and if your loan burden is $2000 then the ratio would be 0.4.

A common mistake that many people make is to take more money loans or make more purchases through credit card as soon as they get a higher credit limit or their income increases after a promotion. This leads to a rise in their debt burden and the debt-to-income ratio which might make it difficult to get another loan in Singapore.

The ideal scenario is to ensure that your EMIs for money loans don’t exceed 10% of your net monthly income. Cut down on excessive borrowings and live within your means to avoid taking loans for lifestyle needs. This will help you in keeping the debt-to-income ratio low and make it easier to obtain a fast loan in Singapore when needed.

Not doing research: When you apply for a loan in Singapore, you must do a thorough search about the lender and the money loans on offer. This will help you find a low interest loan. You can easily search for an online loan from a reputed moneylender nowadays. Further, you must find out the finer details about the loan before taking an instant loan in Singapore. You should find out what are the penalties, processing fees, interest rates, late payment charges and if there are any other hidden or variable costs. This research can let you compare different options and take the best fast loan in Singapore.

Applying for too many money loans: Last, but not the least, a lot of people apply for multiple loans as they need urgent funds for their pressing needs. This need for instant loan in Singapore might make the person apply to several moneylenders at the same time. Each of the loan requests is going to reflect on the applicant’s credit score, and if too many requests come simultaneously then it can lead to a negative impact on your credit score. Taking a loan in Singapore is not a bad thing at all, but you must be aware of these pitfalls and apply for an online loan smartly after doing all your research and calculations.

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Bajaj Finserv Login Portal for all your EMI Card needs

Aug 13, 2021

The Bajaj Finserv EMI Card is a payment strategy. This Bajaj EMI card has an already approved loan ranging from Rs 30K to Rs 3 lakhs in it. The amount of loan for you entirely depends on your credit appraisal. You can spend up to 3 lakh using your card and pay flexible EMI within 2 years. After you get yourself an bajaj EMI card you can use it to purchase anything as per your requirements.

The entire transaction would be transparent and there are no hidden cards on the EMI card. The processing fee varies depending on categories of purchase. However, you can not use your card everywhere. There are 60,000 stores and 1300 cities that have a partnership and where you can use the card. Not only offline shopping but also you can use this card for online shopping from Pepperfry, Amazon, MakemyTrip, Flipkart etc. There is a given eligibility criteria which you have to meet in order to get yourself a Bajaj EMI card and enjoy its perks.

Bajaj Finserv Network Card Login Portal

To get all access to all your details of your Bajaj EMI Card, Bajaj Finserv has for you The Bajaj Finserv Network Card login portal. This bajaj finserv login portal is a one-stop portal by which you track and manage all your monetary transactions. Besides, you can also look after your Bajaj EMI card very effectively. This Bajaj customer login can be used from any corner and at any time as per your convenience. Just by using the right credentials of your Bajaj EMI card you can log in and look into your transactions through the bajaj finserv login.

Steps For Bajaj EMI Card Login

To log in to the bajaj customer portal is easy and time-saving. All you have to do is follow some simple steps and work after your bajaj finserv login. The following are the steps for Bajaj EMI card login:

  • Go to the official website of Bajaj finserv
  • Find the bajaj customer portal to log in
  • Enter the required mobile number
  • You will receive an OTP on the given number
  • Provide the OTP in the bajaj customer portal and you can successfully sign in

Uses Of Bajaj EMI Card Customer Portal

Bajaj EMI card customer portal can help you to track and manage all your financial transactions. After you sign in using your bajaj EMI login credentials you can check the following fields:

  • The EMI status of the card
  • The utilisation limit of the credit card
  • The EMI expiration facts
  • Status of loan
  • Paid EMIs
  • In queue EMIs
  • Spending limit of the EMI card
  • Details of the dealer
  • Details of down payment due date and outstanding amount detail

The Bajaj Customer Portal helps you in managing and knowing all the facets related to investment on an EMI card. Also, it can help you to see and avail of various exclusive benefits and offers from Bajaj EMI Card.

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Regular mutual funds and direct mutual funds – Two sides of the same coin?

Jul 24, 2021

Investors in mutual funds have the option to invest in two ways. One option is direct mutual funds, where investors can buy funds directly through the website of a mutual fund company or through an aggregator offering direct funds. The other option is regular mutual funds wherein investors buy funds through a broker or an intermediary (distributor). This is one major difference between regular and direct mutual funds.

Deciding upon which option is better suited for your financial goals depends on various factors. We have compiled the basics you need to know about direct and regular mutual funds to help you decide which is the best option for you.

What are direct mutual funds?

Direct mutual funds are directly offered by fund houses or Asset Management Companies (AMC) to the investors. With no third-party involvement, direct mutual funds are exempted from brokerage charges or the commission that a distributor could get from the AMC. This could help you earn higher returns due to the lower expense paid. These funds can be bought through online or offline mode and are easily identified because of the word ‘Direct’ in the fund’s name.

What are regular mutual funds?

Regular mutual funds are bought through an intermediary. The intermediary charges fees to the fund houses for selling their funds. The fund houses then, in turn, pass this charge on to investors in the form of a slightly higher expense ratio. The total expense paid is slightly higher than that of direct mutual funds.

Advantages of regular mutual funds over direct mutual funds

  1. Expert guidance: A qualified professional can help you choose mutual funds schemes while taking into consideration your financial goals and risk appetite. They guide your investment journey to help you earn better returns.
  1. Convenience: Investing in mutual funds requires time-consuming research and might be tedious for many. An intermediary analyses these funds and thus saves the investor’s time and efforts. Also, they provide other value-added services that help investors to stay abreast with the fluctuations in the market.
  2. Constant portfolio monitoring: Markets are dynamic, and this calls for constant monitoring of your investments. Intermediaries that monitor market behaviour are quick on their feet to suggest that you sell or swap funds that are not performing.

Advantages of direct mutual funds over regular mutual funds

  1. Higher returns: Investing in direct plans eliminates brokerage charges. This reduces the total expenses spent on a fund. Thus, you are likely to gain higher returns on your investment.
  2. You’re in charge of your investment: With no intermediary involvement, you are in complete control of your investment.

Direct mutual funds vs regular mutual funds – Which is better?

The choice of direct vs regular mutual funds entirely depends on your investment profile. If you are a beginner or don’t have much knowledge about investment, you could go for regular mutual funds. However, if you’re well-versed with market trends and understand the mutual fund universe, direct plans might be the best option for such experienced investors.

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