Which Mutual Fund is best suited for you – Regular or Direct Mutual Fund?

So what’s the buzz around Direct and Regular Mutual Funds?

If you’re an investor or are thinking about investing in mutual funds, we bet you’ve been subjected to an overload of welcomed or unwelcomed, legit or unsolicited advice on direct and regular mutual funds. So what’s going on?

Let’s understand this better

You’d think that a direct fund is right for you because you don’t have to pay a commission! But hold on, there’s got to be a catch right?

So ask yourself these 5 questions before you decide to SWITCH or invest in a Direct Mutual Fund  

Do you understand the financial markets?

1. Can you undertake technical & fundamental analysis of all funds you invest in?
2. Can you make an investment decision without any guidance?
3. Do you have the time to track the market?
4. Are you willing to actively manage & rebalance your portfolio?

And all this amounts to a LOT of time. Are you ready to take on this responsibility and do you have the skill? 

It may seem like Direct Mutual Funds can help you eliminate the third party commission charges, but we feel the need to tell you that although you will pay a small commission on a regular fund, the amount in question must be weighed against the expertise, guidance and convenience it offers.  

So on 24^th July, we hosted a LIVE with industry expert and LXME founder, Priti Rathi Gupta to discuss and get our questions clarified on Regular VS Direct Mutual Funds.

These are the key takeaways from that informative session:-

1. For Regular Funds, the biggest asset is to have someone monitor your funds 24/7 giving you a constant edge in your investments. The guidance, expertise, and rebalancing come as part of a Regular Fund. Also in events like a market downfall, change in sectorial views, debt-equity ratio, and futuristic scenario, the fund manager steps in and guides the investor on the best possible outcome.
   
2. Of course overall returns are very crucial when it comes to your investments but understanding the opportunity cost – The 1% cost of regular funds in return for a 2-3% cost on guided and monitored investments is important to take note.
   
3. Direct Funds is not for all types of investors – An HNI investor who puts crores in Mutual Funds could consider Direct Plans however, even for that type of an investor, it’s important to constantly take out time to rebalance and scale the markets for best course of action which seems impossible.
   
4. Before choosing a Regular VS Direct fund, it’s important to ask yourself these important questions
   What are the skills I have?
   What are the returns I need?
   And therefore, what is the best option for me between costs and returns.