Direct Mutual Funds Vs Direct Stocks: How They Work And Are They Right For You?

Mutual funds and stocks are very popular investment avenues. Despite their inherent risks, many investors prefer them for the potential of high returns. However, what many don’t realise is that they can also invest in both mutual funds and equities directly—without going through a broker or distributor.

Here’s how purchasing mutual funds and stocks directly work:

Direct Mutual Fund Investments

A direct mutual fund plan means investing in a mutual fund without going through a distributor or intermediary. Today, buying mutual funds is incredibly simple. Several do-it-yourself (DIY) platforms like Groww, Zerodha, and others allow easy access, and you can also invest directly through the asset management company (AMC) websites or aggregator platforms like MF Central and MF Utility.

“The key difference between a Direct Plan and a Regular Plan (via distributor) lies in the expense ratio. Direct Plans have lower costs because there are no commission payouts or intermediary fees. Typically, the cost difference is around 1 per cent per annum,” says Rajani Tandale, senior vice president, Mutual Fund at 1 Finance.

This 1 per cent cost difference, though it seems small, can have a big impact on long-term wealth creation. For instance, if you invest Rs 25,000 per month through a systematic investment plan (SIP) for 20 years, at 12 per cent CAGR, the corpus grows to about Rs 2.50 crore and, at 11 per cent CAGR, it grows to just Rs 2.18 crore.

So, it’s a loss of over Rs 31 lakh, purely due to higher costs. Moreover, with mutual funds, you get direct exposure to the stock market without the need to pick and manage stocks yourself. You avoid the risk of poor stock selection, as a professional fund manager handles diversification, monitoring, and rebalancing,” Tandale says.

What Is 'Direct' in Stock Investing?

Under direct stocks, you purchase and sell stocks on your own with professional help.

However, there's an important detail to consider:

While this gives you control, it also demands deep research, sector understanding, and emotional discipline. This requires very deep research, an understanding of technical and fundamental and equity. 

There is a study by the Securities and Exchange Board of India (Sebi) that reveals that 93 per cent of individuals lost their money in equity futures and options (F&O) trading between FY2022 and FY 2024, with aggregate losses surpassing Rs 1.80 lakh crore.

“Generally, during a market momentum, retail participation in equities rises, which is reflected in the number of new demat account openings. For instance, in 2022, around 34 million demat accounts were opened. However, during the market correction in 2025, this number declined by nearly 50 per cent," Tandale says.

This shows that direct equity is not every retail investor’s cup of tea given the time, expertise, and emotional discipline it demands.

Stock picking isn’t a part-time activity you can squeeze in after work. It requires studying balance sheets, developing a deep understanding of the sector, staying updated on the company’s performance, and being aware of both technical and fundamental factors. Trying to do all this in a limited time-frame often leads to poor decisions.

Worse, many investors rely on “tips” from friends or social media without proper research—an approach that is far from ideal. So, while investing directly in stocks or mutual funds has its advantages, it’s important to proceed with caution.