Switch to direct MFs?

POSTED BY Sunny Gandhi ON January 18, 2013 1:22 pm COMMENTS (10)

Hi,

I have started SIPs in Equity MFs in Dec 2012 via FundsIndia. Do you think I can transfer my SIPs to the direct mode or should i continue with the same?

Thanks

Sunny

10 replies on this article “Switch to direct MFs?”

  1. Dont quite follow this?

    1. Me too! No idea how it ended up there. Not my doing!

  2. Sunny Gandhi says:

    Thanks everyone for your suggestions.

  3. You can transfer it if you think you can independently take your investment decision . If you are relying on their suggestions and their expertise, its worth to continue with them ..

    Manish

  4. rahul chandalia says:

    Consider the folowing: http://www.livemint.com/Money/ba9LLrlxZbIZDUp1FU9AbL/How-to-make-use-of-the-direct-MF-plan.html

    Benefits:
    1.Extra returns of ~0.58% annually and compounding impact on that.

    Hurdles:
    1.Decide the investment category, plan, option on your own.
    2.Fill up investment form on your own
    3.Visit RTA/AMC office to submit your forms for each redemption/ investment.
    4.Track & rebalance your portfolio urself.

    I believe, the direct option isn’t viable for small investors. the extra returns won’t be able to justify the services of distributors.

    In contrast, the 0.05% extra returns in Liquid schemes (as per the above article in MINT) is an handsome opportunity for institutional investors. Large corporates can set up dedicated MF research desk for their short term investments.

    1. The hurdles are listed as many but their impact is minimal:

      =======================
      1.Decide the investment category, plan, option on your own.
      4.Track & rebalance your portfolio urself.

      – Independent distributors (including online ones) specify a particular portfolio of schemes based on risk capacity without taking into account individual circumstances. Thus they dont help to track and rebalance either. Model portfolios based on risk taking capacity are available for free from several websites which can be used by individuals to invest directly.

      2.Fill up investment form on your own
      – One time activity. Any point in time you dont need more than 4-5 schemes, so no big issues, IMO.

      3.Visit RTA/AMC office to submit your forms for each redemption/ investment.
      – Except a handful all of them are available for electronic redemption. Investment can be by ECS.

      The advantages of Direct investing far outweigh investing through mediums for most people. Unless ofcourse there is a distributor who can add individualized value-addition for investors.

      1. Fully agree with justgrowmymoney , who incidentally is the first to talk about trail commissions in his blog.

        Unfortunately many investor think a visit to an AMC is too much to ask of their time.
        If they cant find time for that then they are not likely to find time to monitor their portfolio

    2. “I believe, the direct option isn’t viable for small investors. the extra returns won’t be able to justify the services of distributors.”

      That depends entirely on the motivation of the investor to actively monitor his/her portfolio and take informed decisions.
      Has nothing to do with size of investment or size of portfolio

  5. Dear Sunny, what’s important to you? Having comfort of all at one place under fundsindia or taking some pain to earn some extra gain by logging into several AMCs sites & investing directly?

    Mathematically, yes over the long period of time, the difference in expense ratio of funds, ‘ll create a difference but point to be noted, do you have the stomach to remain invested till that point of time?

    Only you can answer this question for yourself.

    Thanks

    Ashal

  6. You can transfer your SIPs. If you can learn and choose funds on your own in future switching is good. Of course to do this you need to fill forms and visit AMCs office to get the online account.

    If you think FundsIndia provides you services which you think is important than you could sacrifice some returns and stay on with FundIndia.

    You need to weigh convenience of a distributor and associated facilities weighed against learning and higher returns.

    So only you can choose what to do depending on what kind of person you are.

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