How can there be any mutual fund investor still out there who doesn’t know that there is an easy way to increase their earnings from someone share Fund 10% or so only by choosing a different plan? And yet it is true. Direct funds account for about 22% of the total money being held in Indian equity funds. The rest is still in regular schemes and those investors are still leaving money on the table for others to pick up. Debt funds have a much higher percentage, but they are mostly used by professional corporate investors, so the story is different.
What knowledgeable direct fund investors don’t realize is that there’s no way you’ll find out about direct funds yourself until you go out and look for it. I mean you’ll see references to the word ‘direct’ around but the actual financial implications are almost entirely cryptic. For those who have been comfortable with how to invest through a large or small distributor, and who perhaps occasionally Google funds or even visit fund companies’ websites, the return There is no way to discover the exact nature and quantity. The benefits you will get through direct money.
The benefits of direct funding are a bit of a mystery, except for some newer platforms or investor-oriented sources like Value Research Online. What a secret There’s a little flavor here. Let me take the example of a typical middle of the road large-cap equity fund that I selected on Value Research Online. If you had invested Rs 10 lakh in the regular plan of this fund seven years back (longest tenure for this fund), it would have grown to Rs 23.2 lakh. The same investment in a direct plan would have increased to Rs 25 lakh. The profit of Rs 15 lakh is 13.6 percent more than the profit of Rs 13.2 lakh. Same fund, same portfolio, just different plan. Obviously, in the long term, the difference can only increase—that’s a mathematical certainty.
Obviously, the fans of Direct Plan are justified in being surprised that most of the people refuse to take this money. Of course, the direct comparison between direct and regular plans is somewhat unfair in some aspects. Direct and regular plans are suitable for different types of investors. Even at Value Research Online, we rate them in different sets, so you can use our free tools to compare them against each other.
Beginner investors need simple facilitation services to facilitate transactions. Even more so, beginner investors need someone to get them started. Unlike a fixed deposit in a bank, a mutual fund investment is not just an automatic extension of some of the services you are already getting. Focusing too much on the last slippage of cost can mean you never really get started.
So what kind of investor would be a good fit for direct investing? It should be someone who understands what types of mutual funds are needed for different types of investment needs, who is able to independently research and come up with a list of funds to invest in, and then actually go through the process Investment without the help of any middleman. After starting investing, an outside source of advice can help someone stay the course whenever the market goes down and investment prices come under pressure. Essentially, you have to do everything for yourself that a consultant should do.
There is no universally correct choice. Every investor needs to figure out what they can do and what someone else needs to do for them.
(The writer is CEO, Value Research)