Direct mutual fund investing is now a hot topic thanks to the advent of discount brokers. Mutual funds were considered a complicated investment instrument, until AMFI’s “Mutual Fund Sahi Hai” campaign. It was popularized by the general population.
Mutual funds have been around for a long time. Regular mutual funds were the best way to invest in them. How beneficial is regular mutual funds now that “Direct Mutual Fund” investment has been introduced? Let’s see.
Regular Mutual Funds
Is traditional mutual fund investing done through a broker, or an intermediary such as an advisor or distributor? The broker is responsible for finding the best mutual fund for you and will be paid a fee by the AMC. This fee is then recouped from the expense ratio. Regular funds have a higher expense than direct funds. Regular mutual funds are a great option for passive investors who want their money to work and earn more while they are working.
Direct Mutual Funds
These funds are more similar to DIY or Do It Yourself mutual investment. After you do your research, find the right fund for you and contact the AMC to handle the fund. Then, it’s time to start investing. The expense ratio for the fund is lower because there are no brokers or aggregators. You can buy the funds online or offline.
In 2012, SEBI launched direct plans for Mutual Funds. The investor can now choose whether to invest through an intermediary or independently. Investors would need to research their options and seek out expert advice from regular funds. Direct plans, however, would be provided by the fund manager.
Why are regular mutual funds better than direct mutual funds?
Advice This is the best option for investors who need financial advice, are kept up to date on market developments and want to optimize their portfolio. A wise investment decision is to part with some profit from sound investment advice.
Risk Mutual Funds can be subject to market risk, hence the need for an advisor. An advisor will spend his time looking at the thousands of schemes that are available to you in order to help you choose the best fund for your goals and risk capacity. This reduces investment risk and provides peace of mind.
Convenience and Advice A research team that analyzes and recommends the right fund. This is a tedious process. Recent events saw a few funds go bust (Franklin Templeton), and investors were left stuck. However, advisors can help you avoid this.
Profile The fund should be matched to your goals and risk taking ability. Your profile must be carefully studied in order to optimize investment returns.
Portfolio rebalancing and monitoring Markets can be tricky and constantly change. How can you, as a passive investor, keep up with the changes? If you make the right moves at the right moment, market changes can be profitable. A market research team can help you make the right changes to your portfolio in order to maximize its potential returns.
Subsidiary Services – An investor will likely need many additional services such as keeping track of investments, providing tax proofs for tax filings, facilitating redemptions, and so on. These services are included in the package, i.e. Regular fund investing.
Direct mutual funds can be fine for people who are knowledgeable about the market and don’t need to incur any extra costs. For passive investors who find it difficult to acquire market knowledge and expertise, and to find the best mutual funds to invest in, a regular mutual fund is the best option. In these turbulent market conditions, it is worth paying a little more for expert advice. This is why the regular fund is better.