Mutual fund direct plans let you invest in mutual funds directly without spending money on brokers and other intermediaries. That is the reason they are referred to as ‘Direct’ plans since you invest directly with the funds in question, without having to involve yourself with any other entity.
As a result, you definitely stand to gain higher returns on your investment.
It is for this reason when it comes to choosing between mutual fund direct plans and ‘regular’ plans, direct plans always make more sense.
In this article, we will highlight powerful reasons for which if you had to choose between mutual fund direct plans and regular plans, why you would always want to choose mutual fund direct plans.
Investments are Made from Hard-Earned Money
For the vast majority of us, the investments we make come from money we earn with a lot of blood, sweat, and tears. Rarely does money for investments come easy, when for most of us, managing day-to-day expenses itself proves to be a reasonable challenge. Sparing money for investments is certainly no mean feat.
Under such circumstances, surely we want to be maximally rewarded for the investments we are making, with the highest possible rates of return.
Mutual fund direct plans make that possible and that is the reason they are highly recommended when it comes to mutual fund choices.
Payouts for Third-Party Entities come from your Pocket
Were you ever under the impression that third-party entities working on regular mutual fund plans had a different source of income, other than from investments made by investors?
Well, then you are mistaken since their payouts do indeed come from the investments that investors make after toiling so hard as we indicated in the previous point.
This on its own would be a powerful reason for you to reconsider any thoughts you may have harbored on investing in regular mutual funds when there are so many extraneous entities unnecessarily feeding off the investments you are making.
Higher Transparency with Mutual Fund Direct Plans
An appreciable aspect of mutual fund direct plans is the fact that there is far greater transparency in their case. Otherwise, with regular mutual funds, since there are payouts to be made to various intermediaries, often we find that all the charges are not made transparent. This is even though, as a diligent investor, you have complete rights to full transparency on the way your funds are deployed.
Investors really appreciate this aspect of mutual fund direct plans since transparency has been a major bane for long. It is only when SEBI mandated all mutual funds to offer either direct or regular investment options that the transparency factor improved considerably.
Higher NAVs = Higher Returns in the Long Run
The NAV or Net Asset Value of a mutual fund denotes its actual value, taking both its assets as well as its liabilities into consideration.
As an investor in mutual funds, you will always be looking at the NAVs of funds that you hold.
In case of mutual fund direct plans, the NAVs will always be higher as compared to regular mutual fund plans.
Among the many reasons we have enlisted for which investing in mutual fund direct plans makes greater sense, perhaps this is the most relevant from an investor perspective. After all, it is the NAV of the fund(s) you hold which will be key to determine the extent of returns you receive.
In the long run, as the NAV continues to rise, the overall value of your holding will keep growing exponentially.
Mutual Fund Direct Plans = Zero Commission Plans
The term “zero commission” has become a rage in India’s investment market today. Practically anywhere you see, “zero commission” will be highlighted as a major draw.
At the same time, some investment options are not truly “zero commission” with some hidden charges or the other.
But in case of mutual fund direct plans, they are genuinely zero commission plans with no commission being charged by the mutual funds.
As the 5 ways above clearly highlight, when it comes to maximizing your ROI or Return on Investment, mutual fund direct plans clearly make maximum sense by far.