Must know Mutual Funds SIP awareness! Earn big amount; Save agent, broker commission! Here is how

Mutual Funds SIP: This is an important financial thing you must be aware about if you are investing hard-earned money in Mutual Funds SIPs. According to digital financial services platform Paytm's wholly-owned subsidiary Paytm Money, it is enabling people to understand mutual funds before they start investing.

There are two options available through which one can invest in Direct & Regular. When one goes through a distributor, broker, or bank, it is usually a regular mutual fund.

As one might not be aware, mutual fund distributors get paid commissions thus returns can be lesser if one opts for the Regular option. Investors can earn a higher return on investment by opting for Direct Funds.

On Paytm Money one can compare the latest Expense Ratio of Direct and Regular plans of any Mutual Fund, the difference is nearly 1% for equity funds, which means the expense ratio of direct mutual funds is 1% lower than regular mutual funds.

Also, it is simple to find out how much more wealth you can create by investing in Direct Plans. The consolidated account statement (CAS) gives a complete summary of mutual funds that one has invested till date.

Here are 8 simple tips Paytm Money suggests to check if one has invested in a Regular or Direct Mutual Fund:

1. If you have invested in mutual funds through a distributor or a broker or a bank then it is highly likely that you have invested in a Regular Mutual Fund

2. Investing in mutual funds online does not mean investing in a Direct Mutual Fund. There are many online platforms or apps that let you invest only in Regular Mutual Funds

3. Investing through the AMC website/app does not automatically mean that you are investing in a Direct Mutual Fund. You can invest in Regular mutual funds as well through the AMC website/app. You need to specifically select the Direct option even while investing through the AMC website/app.

4. Direct funds have the word “Direct” in the scheme name. If you are investing through an online platform, you can easily check this. Some portals can use the abbreviation “Dir” to denote Direct Mutual Funds.

5. If there is no mention of these words or instead there are words like “Regular” or “Reg” then you are probably investing in a Regular Mutual Fund.

6. Expense ratio of Regular Mutual Funds is always greater than Direct Mutual Funds. Before investing you can check the expense ratio and make sure that you are investing in the Direct option.

7. In your CAS, there is a field called Advisor, and if that field is filled with “ARN” followed by a number code, then it is definitely a Regular Mutual Fund. In the same Advisor field if you find values like Direct / 0000000000 / INA100009859, then it is a Direct Mutual Fund.

8. One more way you can verify this is from the communication that the AMC sends you via email or SMS. Most of the AMCs mention the variant of the scheme that you invested in. If you cannot find the word “Direct” in either of these communications, then most probably you are investing in a Regular Mutual Fund.

How to invest in Direct Mutual Funds using Paytm Money?

If you realize that your investments are through Regular Mutual Funds you can easily change them into a Direct Mutual Fund. There is an option called switch and using this function, you can shift your investments from Regular Funds to Direct Funds and thus earn higher returns on your investments. A switch transaction involves redeeming units from the regular plan and making a fresh investment in a direct plan, exit load (if any), and capital gains tax would apply. Also, switching a Regular ELSS fund post-lock-in period to a Direct ELSS fund plan will lead to another lock-in period and users can claim tax benefits under Section 80C.

Paytm Money is now offering the switch feature on its app. This will help you track all your mutual fund investments in one place and also help you earn higher returns on your investments by letting you switch from Regular Plans to Direct Plans in a few simple steps.

In the case of equity funds, if you switch within 1 year from the date of investment, the Short Term Capital Gains (STCG) will be taxed at 15% plus an applicable surcharge. However, if you switch after 1 year from the date of investment, then the Long Term Capital Gains (LTCG), exceeding the threshold of Rs 1 lakh, will be taxed at 10% plus an applicable surcharge.

In the case of debt funds, if you switch within 3 years from the date of investment, then the STCG will be taxed as per your applicable slab rates. However, if you switch after 3 years from the date of investment, then the LTCG will be taxed at 20% after indexation benefit.

Download your consolidated account statement (CAS) and upload it on our app to switch your investments. Thinking of investing in Mutual Funds? Go the Direct way!