How Switching to Direct Mutual Fund Plan guarantees extra returns

It is said that money saved is money made. But gone are the days when you stowed away your wealth in lockers. In the current times to beat the inflation it is important that you invest smartly and stay on top of your finances. For this reason, a large percentage of salaried individuals invest in mutual funds and are well versed with how they work Click here. But did you know that you could be smarter and savvier with investing in direct mutual fund plan? According to a regulation by SEBI 3 years ago, all mutual fund schemes are required to offer two kinds of mutual fund plans: Direct Mutual Fund plan and Regular Mutual Fund plan. Let us see what a direct mutual fund plan is and how switching to direct mutual fund can help add better returns to your investments.

What is a Direct Mutual Fund?

A direct mutual fund scheme wherein you get higher returns for your investments. This is because the expense ratio of a Regular mutual fund plan is almost three times higher than corresponding Direct mutual fund plan for the financial year 2015-16. Return of investment is calculated based on the expense ratio of Regular and Direct mutual fund plans. For instance, let us see how the expense ratio factors in:

The expense ratio is essentially the annual fee that fund houses deduct every fiscal year from the shareholder’s asset as the operational cost of scheme. This operational cost includes record keeping, taxes, legal expenses, accounting and commission fees. The commission fee paid to the distributor of the fund, is the largest expense of operational cost.

However, in a Direct mutual fund plan the commission fee is omitted and this in-turn lowers the expense ratio. And low expense ratio means higher and better returns for the investor.

Returns of a Direct Mutual Fund plan compared to a Regular Mutual Fund plan

Let us compare the expense ratios of regular and direct plans of the top performing mutual funds.

Schemes Regular Vs Direct mutual fund

Tab 1: Difference in the returns between a regular and growth plan compounded for one and three years.
Note: All data is in CAGR as of 25-04-2016  (Raw data Source:  ANSI)

Reg Vs Direct mutual fund Comparision

    Chart 1: Difference between Regular and Direct Plans return(CAGR) in last 1 year

 

Difference between Regular and direct mutual fund

   Chart 2: Difference between Regular and Direct Plans return (CAGR) post 3 years of investment.

It is evident from the above chart that with a direct mutual fund plan, you can gain up to 1.5% of extra returns by omitting the commission. And the best part is that even if market is in downturn you keep saving this extra 1.5% commission free!

The Power Of Compounding

The appealing factor of compounding is that the return on investment itself becomes an investment and starts earning interest. This extra earning every year leads to 30% extra wealth over a period of 30 years. This is the power of compounding!  Let us see this from a simple breakdown shown in the following chart.

Regular Vs Direct Mutual Fund Growth Chart

Investment Amount             = 50,000 in each plan

Scheme Growth                     = 12 %

Savings on Commissions    = 1 % extra in Direct plan

(Regular Vs. Direct)

Invested Time Span             = 30 Years

(Source: WealthTrust)

comparison of returns in Regular and direct mutual fund

Chart 3: Regular Vs. Direct Growth in 30 Years 

This chart shows if you invest Rs. 50,000 in Direct Plan today you would earn ~ 1,00,000 extra at the end of 20 years and ~5,00,000 extra at the end of 30 years, saving you up to 30%. This is the range of wealth that you can create by switching to direct mutual fund plans.

Get a super quick analysis of your Mutual Fund Portfolio for free and know how much you are loosing on commissions: Portfolio Analysis

Download WealthTrust – Switch to a direct mutual fund scheme now

Despite the amount of investments, only a small population of investors invest in direct mutual funds. This can be due to two reasons: lack of awareness or management of multiple mutual funds separately.  But now that you have the awareness, we have made it easy to manage multiple direct mutual funds at literally on your fingertips!

Introducing WealthTrust, India’s first zero-commission wealth management app for the modern investor. Your money and data is secure with WealthTrust App’s top notch security standards in compliance with those of leading banks. Your financial data stays in your phone and is not secured in our servers. The user friendly interface helps you manage all your accounts from single login with ease. WealthTrust App provides you paperless mode of investment and takes only seconds to switch from regular to direct plan. One of the key feature is research recommended funds i.e. the app automatically picks top fund suggestions suitable for you upon analyzing almost 4000 schemes out there.

So, let our technology take care of your investments and you can review it anytime. Unlike the conventional approach, you can now complete the formalities in no time with a few clicks as described here:

Smart Switch in Seconds

Smartly switch in direct mutual fund plan

WealthTrust App lets you switch your regular scheme to direct scheme in seconds. Download the WealthTrust Mutual Fund app  and save up to 30 % in 30 years.

Other Key Benefits of Zero Commission Direct Mutual Fund Plan

More often than not, distributors or brokers who assist investors in their financial planning do not promote direct plans as they thrive on the commissions they receive from the investors’ money. This can lead to mis-selling of plans. With a straight investment in a direct plan you can reap the following benefits.

  • Omit the commissions to distributors from your investments and get the full return.
  • Find mutual fund plans best suited for your investment goals and avoid being prey to mis-selling.
  • Let the power of compounding earn you extra 30-50% returns over long term.

So switch to direct mutual funds plan now using WealthTrust App and be a smart investor.

Do visit our website to know more about us. For more information about Mutual funds do read our Blogs

Contact us on service@wealthtrust.in

26 Comments on “How Switching to Direct Mutual Fund Plan guarantees extra returns”

  1. Looks nice.. but a machine cannot replace a human. I wouldn’t mind paying my agent extra & that too spread over such a long period because he sticks with me through all thick & thin. If one is unsatisfied with his/her financial advisor then should look out for such technology. Tommorow someone will wake up & design an App to replace your doctor too. A specialist is always needed.

    1. Hi Rikin,

      Our app is free for 6 months for every new user and post 6 months there will be a monthly charge of Rs. 99/- only. Please note tracking portfolio on the app will be free always with no charge at all. Feel free to WhatsApp us on +91 98790 02229 in case of any further feedback or queries.

      Thanks,
      Team WealthTrust

  2. There are some funds in my portfolio which are not direct
    whatever is commission to distributor which is already paid from my investment
    Is it necessary for me to convert my regular fund to direct fund
    As whatever is the loss is already happened
    Also pls clear switching is considered as redemption i.e inco.e tax point of view

    1. Hi Chandrashekar,

      The commission is of two types, one is upfront which is paid in the same month the mutual fund is bought and trail commission which is paid every year. Trail commission is almost same as the upfront commission. Hence, the loss regarding commission is every year and since the fund value increases every year, the value of loss also increases. Switching is considered as redemption and buying a new plan as per income tax point of view. At Wealthtrust, under the advisory plan, we guide you how much to switch when, so that you can avoid any exit load and minimize the tax. The advisory plan comes along with many other benefits, like portfolio review, guidance on new investments, risk profiling etc.

      Thanks,
      Team WealthTrust

  3. You said that tracking portfolio is always free on this app. Does it mean that charges of Rs. 99 payable ( after six months) is only for any transaction such as purchase/swith/redemption to be made by investors.

    1. Hi Saroj,

      Kindly download our app and opt for advisory services. We will help you switch to direct plans and even rebalance your portfolio for optimal returns.

      Thanks,
      Team WealthTrust

  4. I have registered with wealth trust a few days ago but my total portfolio have not been traced yet.. Further my all plans are regular plans now I wanted to buy one direct plan please suggest which is the best…. Thanks

  5. Hello, I have switched one of my portfolio from regular to direct, before switching every month my investment was auto debited from my bank, now further what about my next month investment after switching.

    1. Hi Saroj,

      You have to approach your distributor or RTA (CAMS,Karvy) & fill a form for the same. After that you can start new SIP in direct plan with us.

      Thanks,
      Team WealthTrust

  6. I am regular mutual fund investors..investing directly through wealth trust is safe as compare through advisor.can Direct mutual fund give guarantee for advising investor when preforming,not preforming funds.it is safer then through regular mutual fund.

    1. It is safer sir, but you have to either go for a SEBI registered RIA if you want an Advisor or do your own research.You can try our wealthtrust App and there you will find lot of experts who can help you out.

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