Securities and Exchange Board of India (SEBI) mandated way back in 2013 that every mutual fund scheme shall have two plans – Regular & Direct. Both these plans are identical, except that in case of the Direct Plan, there are no recurring commission payouts to distributors/ brokers/ agents. When you buy a Direct Plan from an advanced fin-tech platform such as Orowealth.com, you only have to pay a fixed one-time fee, and you get some added benefits as well. A Direct Plan is more beneficial to an investor in the long run. Let us now have a look at three main reasons why an investor should invest only in a Direct Mutual Fund plan:
1) Zero Commissions: Higher Returns and larger corpus
You may not be aware but, Mutual Fund Distributor commissions grew by 70% in 17-18, while the overall assets managed by the Mutual Fund industry only increased by 26%. Those who sold you your MF scheme earned more than you did on your funds! When you invest in a Regular plan of a Mutual Fund scheme, a big chunk is regularly cut away from your gross returns in the form of commission every year to intermediaries such as distributors, agents or brokers who sold you the plan. These commissions could be as high as 1-2% p.a. of your investment but usually, go unnoticed. You can prevent this leakage by investing in a Direct plan. At Orowealth.com, you can choose from several Direct Mutual Fund schemes to arrive at the best investment suited to you. For every purchase of a Direct Plan, you only pay a one-time fee, and there are no recurring or hidden costs. Investing in a Direct Plan thus translates to lower expense ratio, i.e. the cost for managing a fund since you no longer have to pay commissions regularly. If you are wondering how much of benefit 1-2% p.a. can make to your returns and overall investment, the following example may surprise you:
Let us assume that you have a sum of Rs. 1.5 lakhs to invest in a mutual fund. You have the choice of investing in a Regular plan with 2% Expense Ratio while in case of a Direct plan you have a reduced Expense Ratio 1%. Both plans are expected to give a gross return of 11%. Let us see the calculation over a period of 20 years to understand why a Direct Plan is better:
The Net Return in case of the Regular Plan is 9% (11- 2) while for the Direct Plan, it is 10% (11-1). The Net Return is higher for the Direct Plan because of the lower expense ratio. At the end of 20 years, the meagre savings of 1-2% p.a. in commissions could lead you to earn a hefty sum of Rs. 1.6 lakhs as result of compounding. You can use Orowealth’s tool to see how much you have paid in commissions so far.
2) Unbiased Advisory
Regular plans lead to a lot of mis-selling, i.e. an intermediary persuading an investor to buy a scheme that would earn him significant commission rather than the one that would result in highest returns for the investor. The personal bias of the intermediary is unavoidable in case of a regular plan. However, when you buy a Direct MF plan from Orowealth.com, they have a transparent advisory for recommending funds that match the investor’s financial goals, investment horizon and risk tolerance.
3) Hassle-free management with all investments under one roof
Remembering the usernames and passwords for several MF accounts is very troublesome if you go about investing in direct plans with each fund house differently. A more effective way to manage and track your MF investments is to get them all under one platform. Once you have converted them all to a Direct Plan via Orowealth, you can regularly track your entire portfolio conveniently. Predictive analysis tools also prompt you to make a change in the portfolio, if it is required. Orowealth’s hi-tech platform is also very secure and trust-worthy. It is encrypted with best-in-class security solutions with strict privacy policies. In short, no more worrying!
Now that you know the benefits of investing in a Direct MF Plan, why not invest in it?
Choose from a wide range of MF schemes
Partnering with all the leading mutual fund houses, Orowealth provides you with the liberty to choose a direct plan from a buffet of funds- over 2000+.
Switch to a Direct plan with a single tap
If you already own a regular mutual fund plan, switching to a direct plan is extremely simple. You have to import the schemes owned by you to the platform, the team at Orowealth helps you analyse it, and then you can switch to a direct plan.
Get support from an experienced, well-qualified team of experts
If you prefer to be guided by a human advisor, a personal advisor from a team of qualified professionals who you can trust shall understand your financial needs and goals and help you plan your investment strategy.
Orowealth currently manages over 600 Crores in assets under advisory for over thousands of clients.
So are you ready to earn more with every investment? Head to Orowealth.com and buy a Direct Mutual Fund Plan or switch to one today!
(This article is sponsored by Orowealth)