Advantages Of Investing In A Direct Mutual Fund

There are several distinct advantages of opting for a direct mutual fund plan:

# Higher Returns – Direct plans always generate higher returns in comparison to regular plans as these plans do not have to incur distribution expenses, the same savings are invested back in the fund. Consequently the investor is able to get higher returns. Although the difference might seem insignificant in the initial years, the power of compounding makes it substantial over the long term. Many people often do not realize the long-term financial implications of opting for a direct plan instead of a regular plan. For example, as a part of your retirement plan, you start a monthly SIP of Rs 10,000 through the direct plan of a mutual fund scheme at the age of 25 and continue with the SIP for 35 years, the plan would create a corpus of Rs 11.28 crore at the time of retirement assuming an annualized return of 15%. If the annualized return from a regular plan were 1% lower return than the direct counterpart, the same SIP would have grown to Rs 8.84 crore which amounts to a difference of Rs 2.44 crore over a period of 35 years.

# Simplified Process – It’s not too hard to opt for direct plans as you can directly buy these plans from the mutual fund houses, either online or through their branch offices. Even for situations where an investor decides to buy direct plans through several AMCs, the process can be streamlined if he/she opts to buy these plans from an online mutual fund market place absolutely free.

# Knowledge Bank and hand holding – With advancement in technology and the emergence of online financial market places. it has become very convenient for even first-time investors to buy or sell mutual funds directly. These online market places have a plethora of data and information that helps an investors in making the right financial decisions. The advanced search engines on these platforms are able to offer customized mutual fund baskets that suit one’s financial plan, and the best part is all of this is absolutely free. First-time investors can avail these services on these platforms. In addition to enabling the sale and purchase of mutual funds, these platforms also provide market insights, fund recommendations, online tools and calculators that help investors in making the right investment decisions as per their financial goals, risk appetite and investment horizon

To conclude, the choice between a direct plan and a regular plan is simpler than one thinks. The amount of savings one can make over a longer period of time more than compensates for the extra work that one needs to put in making the right selection in terms of mutual funds. If one has the willingness to take control of one’s financial decisions and the determination to learn and go through the process on their own, opting for a direct mutual fund plan should be the default choice. For investors who do not have the luxury of time and who are not comfortable in making an informed financial decision based on personal research, it is advisable to opt for regular mutual funds with the help of a financial advisor.