Timely KYC submissions and study of investment plans are all a part of this profile. Documentation and Due Diligenceĭirect mutual fund investors have to handle all documentation and due diligence on their own. It is important to go through the relevant tax laws and by-laws to ensure that you do not incur excessive taxes. Similarly, there are specific rules regarding the switching of debt-oriented funds as well. However, if you switch after one year of investment, the transfer is tax-free. Switching equity funds before one year of the investment is complete results in 15% taxation on capital gains. The charges can be anywhere between 0-2%, depending on the type of fund. They are the percentage value charge if you redeem the fund before its investment duration is complete. Whenever you switch from regular to direct mutual funds, exit loads are inevitable. Portfolio tracking is all your responsibility as well, with no investment advice from the fund manager. You have to keep in touch with the pulse of the market and study trends in detail to invest wisely. How to Take Care of Your Funds on Your Ownĭirect funds have a higher Net Asset Value than regular funds, but they require in-depth market knowledge and tracking. Some of the things you need to be aware of while switching to direct funds are: 1. There has to be a significant difference in the return on investment between the regular and direct plans for the given period of time, which would make the decision logical. Switching from a regular plan to a direct plan can be generally considered when you have a long-term investment, for say 10+ years. However, before rushing headlong into any decision about switching mutual funds, it is important to analyze if your concerns are practically valid. There can be several reasons for switching funds – change in investor objectives, low-performance of current fund scheme, or a desire to handle mutual funds by themselves. How to Decide Whether You Should Switch Mutual Funds? Switching from a regular to a direct plan reduces your cost marginally, but you are then responsible for managing your funds independently. The difference between a regular and direct plan is that the former includes commissions you pay to a certified broker, while the direct plan does not have these costs. This also involves exit loads and capital gain payments.Īs we have seen previously, switching within the same fund house involves switching between schemes or from a regular to a direct plan. In this case, you will need to redeem units from the fund source and then purchase units in the fund target. If you were to switch fund houses, it is known as ‘Switch-in, switch-out’, where you switch out your mutual funds from one fund house and switch into another. In this case, you are moving funds within the same fund house. When you decide to move your whole investment or some part of it from one mutual fund scheme to another, it is called ‘switching’. On that note, let’s discuss how to switch mutual funds. There are certain rules and steps involved.
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