The Investing Dilemma : Direct or Regular Plan?
With the growing awareness of mutual funds in the investment industry a plenty of information is being discharged through a huge number of mediums like Youtube/Facebook videos, Email Newsletters, Display Advertising or Blog Posts. The genuineness of this huge bucket of information so easily available is quite frequently questioned by many.
To clear the air and present some ice breaking information to provide the wider picture behind the dilemma of choosing among the Direct and Regular Plan when it comes to Mutual Funds first we’ll have a short flashback on what’s the basic difference among the two.
Mutual Funds offer two plans through which an investor can choose, which are Direct and Regular. Under the direct plan as the name indicates an investor directly deals with the Mutual Fund AMC whereas under the Regular Plan the investment is done through an intermediary like a distributor, broker or some bank official and all of these people are compensated by the AMC at different rates.
1. Primary Focus – Primary concern of the investor isn’t about creating a huge corpus anymore, eyeing expense ratio and making sure it stays minimum is given utmost importance.
2. Brand Name – The premium amount for the brand name is highly unwarranted and it happens as people are often ready to buy based on star ratings.
3. Need for Active Fund Management – Because investment strategy practiced is influenced by the market brand of the fund it clearly indicates the need of an advisor who knows about the ins and outs.
4. Investment Holding Clarity – Proper clarity in the time period for which an investor is willing to invest automatically eliminates options such as PPF/Sukanya Samriddhi since the rate of return shows a considerable jump in mutual funds in a 15 year time period.
5. Growth Rate – The growth of India in the coming years is expected to be way more than it happened in the previous 5 years. Now this growth is gonna trigger changes, changes in every industry whether big or small require continuous attention which can aptly be done by an advisor.
6. Expense Ratio – The constant urge of todays millennial investors of choosing funds which promote a low expense ratio ends in lesser profits in most cases since sometimes funds with greater expense ratios tend to perform better.
7. Hold of an Advisor – The more you share with your advisor/consultant, the better he will be able to cater to your needs like telling you not to settle with a percentage rate slightly above what a fixed deposit is offering when the money is parked for longer time frame i.e 10-15 years.
8. Investment Mapping – Simply making investments won’t cut it in this cut throat competition era. Making the money available when your daughter needs it is the catch.
9. Discipline – Nobody likes it but we all need it. Indian upbringing makes us that way, a little too dependent and carefree. This is when the advisor kicks in who for the sake of his cut makes sure you abide by the rules of the investor tribe.
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