What are the pitfalls of direct plan?

POSTED BY Anshuk Jain ON February 23, 2013 9:47 pm COMMENTS (6)

I know of pitfalls like incovenience of filling the forms yourself and not getting advice etc. I am not looking for those. 

Is there any scenario (however extreme) in which the returns from direct plan can be less than normal plan.. I thought they will have a separate corpus and hence can be impacted due to sudden exodus.. but that is not the case.. Looks like all the plans share the same corpus..

Any disadvantages?


6 replies on this article “What are the pitfalls of direct plan?”

  1. Dear Anshuk, either the usual pit falls of regular plan ‘ll be there or none. No Individual pitfall ‘ll be there which is not in Regular plan.



  2. Anshuk Jain says:

    These plans will have the same AUM, same portfolio.. all the decisions taken by the fund manager will be for the entire corpus and hence the returns before expenses will be same..

    Guys, any risk that you see with direct plans?

  3. Anshuk Jain says:

    @FFC, check out any AMC’s website or VRO site.. The plans have the same AUM.

    1. If I take HDFC equity page on VR the net assets info is dated before the advent of direct plans for both regular and direct plans! So I would think this info is not updated and that assets under direct funds should be available soon. However as long as they don’t take a trail commission from my invest (ie from a direct investor) I don’t care for that statistic.

  4. Filling the forms and getting access online is an onetime effort and does not qualify as a disadvantage. If you dont need advice then there are absolutely no disadvantages with Direct Plan – in fact there are only advantages with lower expense ratio. There is “NO WAY” a Direct Plan can perform poorer than one bought thru a distributor. The expense is ‘charged’ post the return so you will ‘always’ be better off in a DIRECT PLAN. Over years this seemingly minor difference turns into a huge corpus by itself. http://justgrowmymoney.wordpress.com/2012/03/16/impact-of-trail-commission-on-your-mutual-fund-returns/

  5. Can you point the source of this info:
    “Looks like all the plans share the same corpus”

    I thought they will have a separate corpus since trail commissions in regular plans are deducted from entire corpus. The sudden exodus in a regular plan then will increase trail commissions.

    I cant think of any obvious difficulties

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