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In my last article, I had discussed Direct Plans and their benefits. In today’s article I will continue with Direct Plans but only this time I will explain to you how to invest in them and convert your existing funds into Direct Plans.

How to Invest in a Direct Plan

  • Contact an AMC or a fund house for the mutual funds investment form
  • Fill the details in the form and select the option “Direct Plan.”
  • If you happen to forget mentioning “Direct” in the form and the agent code is missing, the fund house will treat your application for Direct Plans by default. But, try not to skip this field.

How to convert your existing MF into Direct Plans

To convert your current mutual fund investments into Direct Plans, you will have to submit a “Switch Request” to the fund house. Once you submit the request, the fund house will convert your current funds into Direct Plans. This process usually takes about 10 working days, post which you will be able to enjoy the benefits of a direct plan.

What happens to SIPs and Tax-saving mutual funds (ELSS)?

SIPs: As the AMCs launched Direct Plans on 1 Jan 2013, therefore all the SIPs started prior to this date will be considered as standard plans. To convert these SIPs into Direct Plans, you will have to submit the “Switch Request” form as mentioned above. However, if you contributed toward an SIP directly with an AMC after 1 Jan 2013, it will be considered a Direct Plan. If you are in doubt, do contact your AMC to confirm.

Tax-saving mutual funds: ELSS schemes can be converted into Direct Plans only when their lock-in period is over. If your tax-saving mutual fund is still under the lock-in period, wait it out and then convert it into a Direct Plan.

Keep in mind: ETF and close-ended mutual funds do not offer Direct Plans.

Do you need to pay for switching to a direct plan?

If you are switching an investment plan being managed by an agent or a distributor, you will have to pay the exit load. However, if you were already investing directly with the AMC, no exit load will be applicable.

By Naveen Kukreja, MD, PaisaBazaar.com

First published in Deccan Chronicle

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