Now Reading: Direct mutual fund plans save cost but test investor discipline
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Direct mutual fund plans save cost but test investor discipline
Direct mutual fund plans save cost but test investor discipline
Direct mutual fund plans, introduced in 2013, let investors buy from fund houses without a distributor, saving up to 1% in expense ratios. Over 10 years, a Rs 10,000 monthly SIP in…
The Story in Brief
Direct mutual fund plans, introduced in 2013, let investors buy from fund houses without a distributor, saving up to 1% in expense ratios. Over 10 years, a Rs 10,000 monthly SIP in the average direct plan yielded Rs 27.42 lakh versus Rs 25.58 lakh in a regular plan, a gap that widens with time. However, AMFI data shows 41% of direct plan assets are redeemed within the first year, and only 20% stay invested for over three years, against 32% in regular plans.
Industry experts say the behavioural 'tax' of panic exits, wrong fund choices, and stopped SIPs can outweigh the cost savings. Mohit Bagdi of MIRA Money notes that while funds perform well, investor timing and behaviour often lag. Ajay Kumar Yadav of Wise Finserv says the visible cost difference is often offset by invisible mistakes, making a distributor's handholding a valuable 'cheapest insurance' for many investors.
The Indian Opinion
The direct-versus-regular plan debate is often framed as a simple cost war, with frugal investors pitted against fee-charging distributors. What gets ignored is that most people lack the stomach for market swings. The narrative that DIY investing always wins ignores the data: direct investors flee faster. The real test is not which plan you choose, but whether you can hold your nerve when the market drops 20%. Until a study tracks actual investor returns by plan type over a full market cycle, the smart money stays on discipline, not just discounts.
Source: economictimes.indiatimes.com
This story was synthesised by AI from the source linked above.
