The low-cost direct mutual funds are gradually gaining popularity, mainly among HNIs and big corporate investors. However, it is also true that many small investors are still trapped with the high cost regular plans. It is basically and extensively because of lack of awareness. Of course, ask yourself about direct funds and you might not know much about them right/
Even the people who know that direct plans are cheaper than that of regular plans often do not switch to the former as they are ignorant of the extent to which a direct plan can enhance their overall return. There are even investors out there who use direct mutual fund app to do their investments.
Experience gain by going direct
Three year returns of direct plans are absolutely higher compared to that of regular plans. You must note down that the difference in the normal returns of the direct and regular plans of every single category has been used for calculations.
You know the compounding effect means that the return difference, on account of cost savings, is going to get compounded over the years and help you to construct a much bigger quantity in the long term. In case one goes by the average category returns for direct and that of regular plans, the extra gain over a three-year period for a person having Rs 50-lakh investment in direct plans of diversified equity funds is going to be Rs 2.04 lakh. Even the returns for direct plans of the temporary debt fund category are substantially higher by Rs 1.05 lakh.
Slowly people are beginning to understand the difference that direct plans can make to their portfolio since the expense differential between that of regular and direct plans has not been getting down; direct plans shall continue to form greater wealth, even for investors who are beginning anew, over the long term. An SIP of Rs 10,000 for thirty years is going to produce a corpus of Rs 2.27 crore at ten percent compound annual growth rate (CAGR) and of course Rs 2.83 crore at eleven percent CAGR—a difference of Rs 55 lakh.
How to construct a portfolio having direct plan?
First of all you have to identify the plans that are there and then pick one that you find suitable. Should you construct your portfolio all by yourself or take the assistance of an expert? It all rest on on your knowledge and understanding of mutual funds. In case you know how to structure your portfolio, you must do regular reviews and can pick up suitable mutual fund schemes. However, you can also pick direct plans. Otherwise if you are not sure about the portfolio construction and you lack knowledge then you must take professional help of professionals. The experts would filter out the best and most suitable options for you to choose from. They would also tell you about difference between different plans so that you can make an informed decision.
Thus, having all these things in mind you must go for direct funds. These might be a threshold to great investment and returns.