DIRECT MUTUAL FUND PLAN ADVISORY SERVICE

No Commission - Higher the Returns

SEBI had already undertaken a number of reforms in 2012, including the introduction of direct plans in mutual funds. Each mutual fund has two alternatives with effect from January 2013: a regular plan and a direct plan.

The two choices of the same mutual funds are available, managed by the same fund manager who invests in the same bonds and stocks. The only difference between these two is that your mutual fund house pays a commission to the broker/agent as a distribution fee in the case of a regular fund, whereas no such fees/commission is paid in the case of a direct plan.

What is a Direct Mutual Fund Plan?

Direct Mutual Fund is the type of mutual fund that is directly offered by the mutual fund asset management company. In other words, there is no involvement of third party agents – brokers or distributors. Since there are no third-party agents involved, there are no commissions and brokerage.

‘Direct Plan’ and ‘Regular Plan’ are both parts of the same mutual fund scheme, have the same/common portfolio, and are managed by the same fund manager, but have different expense ratios (expense ratios-recurring expenses that are incurred by the mutual fund scheme).

Direct Plan has a lower expense ratio than the Regular Plan, as there is no distributor/agent involved, and hence there is saving in terms of distribution cost/commissions paid out to the distributor/agent, which is added back to the returns of the scheme. Hence, a Direct Plan has a separate NAV, which is higher than the normal “Regular” Plan’s NAV. Over the years, the lower expense ratio of the Direct Plan translates to higher returns on the investments which keep compounding over the years. Thus, the investment in Direct Plan would be worth more over a period, in comparison to investment in the Regular Plan of the same scheme.

What is a Regular Mutual Fund Plan?

Regular mutual fund plan that is bought through an intermediary. These intermediaries can be brokers, advisors, or distributors. The intermediaries charge a commission for selling their mutual funds. Mutual fund companies usually recover this commission through expense ratio. The expense ratio for regular mutual funds is higher than direct mutual funds. Hence the returns tend to be higher for direct plans.

Reasons Why Direct Mutual Funds are Better

A Lower Expense Ratio of Direct Plans

The expense ratio is the proportion of Mutual Fund’s daily net assets used for meeting their annual operating expenses. Annual operating expenses involve numerous costs incurred for advertising, fund management, commissions, and administration to the agents and distributors. As the fund houses do not require paying any commission to the distributors selling direct plans, the operating expenses of such plans are lower as compared to regular plans. Basis the fund category, the operating expenses of direct plans is up to 1.5% lower than their regular counterpart, which translates to a lower expense ratio for direct plans.

Direct Plan
Regular Plan

Higher Returns From Direct Plans

Lower expense ratios of direct plans result in higher returns. As savings in distribution expenses remain invested in direct plans, it starts to generate returns on their own owing to the compounding effect. The difference tends to be substantial in the long run.

Higher NAV

NAV – Net Asset Value.

It represents the value of a mutual fund and is determined by calculating the total assets owned by the fund and dividing it by the number of units outstanding.

If the fees paid to the agents can be avoided, then the amounting NAV is higher.

As a result, direct funds have a higher NAV than regular funds of the same mutual fund. As a result, your total investment value is higher in a direct fund.

Fewer Chances of Being Misled

No hidden charges, vested interests, or misled motive.

While retail investors might think that having an agent by their side will be helpful for their investment, they are only partially correct. A look at the consumer forum will tell you that there are many complaints filed against agents who duped investors and stole millions. Agents also advise forcefully in long term locking funds for their recurring commission benefits.

While not all agents are fraudulent, the fact that their compensation is on a commission basis and depends on your investment amount brings about a conflict of interest.

With direct funds, the chances of such activity are next to none.

Difference between Regular Plan and Direct Plan

Parameters Regular Plan Direct Plan
Purchase of units Units are purchased with the help of a broker or agent Units can be purchased by investors directly
Additional charges An additional service fee is paid to the intermediary No additional fee is charged
Expense ratio The expense ratio is higher since the intermediary is paid

commission by the AMC

 The expense ratio is lower

 
Returns Lower returns since expense ratio are more Higher returns since expense ratio are less
Net Asset Value (NAV) NAV is lower NAV is higher

We Offer in Direct Mutual Fund Plan Service

  • • We managing entire Mutual Fund Portfolio as a Fee-based Advisory. Not a Commission Agents or   Brokers.
  • • We don’t Sell Financial Products. Provide Financial Advice.
  • • Unbiased Advice – Not affiliated or associated with any Financial Institute like Bank, Insurance &   Mutual Fund Company.
  • • Recommendations in Direct Mutual Fund Plan Scheme.
  • • Design Customized Mutual Fund Portfolio after analyzing detailed Financial Requirements.
  • • Risk Management For entire Mutual Fund Portfolio.
  • • Detailed Analysis in existing Mutual Fund Portfolio.
  • • Service for transfer existing Regular Mutual Fund to Direct Mutual Fund Plan.
  • • Continue Review & Monitoring on Mutual Fund Portfolio.
  • • Suggest mid-way Correction whenever Required.
  • • Tax Planning.
  • • Provide Single Platform for all Direct Mutual Fund Tracking & Investment.
”Wealth Care Services” works as a consultant based organization, so our suggestions are not influenced by any personal edge. Make sure your hard-earned money is managed by the right people.

“Mutual fund sahi he..but with the right advisory”

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