1. Direct mutual fund plans undoubtedly provide the reward of lower expenses resulting in higher returns, that does tend to accumulate over time in long-term investing.
2. However, existing investors, tempted to move from Regular plans to Direct plans, need to tread with caution, because there are costs involved, as well as whether the difference in returns is large enough to forego the services of an intermediary.
3. Making a switch is a simultaneous redemption and purchase involving Securities Transaction Tax, possible exit loads, and capital gains tax too.
4. Whether you should go for Direct plans depends entirely on what services your fund advisor offers you, and whether you can fully substitute them yourself in Do It Yourself mode.
5. If you're sure, then switch ONLY when you have passed the minimum tenure in which exit load and Short Term Capital Gains Tax is applicable, by stopping the Regular plan's Systematic Investment Plans and Systematic Transfer Plans, and starting them in the Direct plan of the same scheme.
6. Don't switch in case of Non-Equity funds as tax incidence is very high compared to the benefit; start fresh Direct plans instead.
7. Do remember that going Direct is a compromise on convenience to some extent IF your advisor is already spending time and effort in your fund selection, paperwork and performance tracking satisfactorily.
8. But for savvy investors, who can manage their own investments, Direct plans help.
9. An investor can invest on his own in a Direct plan without the help of an intermediary.
10. A Direct plan has a lower expense ratio since it doesn't include payments to distributors or advisors in the form of commissions, which go to the fund's NAV, and thus to the investors.
11. During transactions in a Direct plan, an investor uses the Direct option instead of a distributor's ARN code.
12. The entire paperwork has to be managed by the investor in a Direct plan.
13. Due to the difference in expense ratio, the returns (and dividends if any) from a Direct and Regular plan will be different even if they have the same portfolio.
2. However, existing investors, tempted to move from Regular plans to Direct plans, need to tread with caution, because there are costs involved, as well as whether the difference in returns is large enough to forego the services of an intermediary.
3. Making a switch is a simultaneous redemption and purchase involving Securities Transaction Tax, possible exit loads, and capital gains tax too.
4. Whether you should go for Direct plans depends entirely on what services your fund advisor offers you, and whether you can fully substitute them yourself in Do It Yourself mode.
5. If you're sure, then switch ONLY when you have passed the minimum tenure in which exit load and Short Term Capital Gains Tax is applicable, by stopping the Regular plan's Systematic Investment Plans and Systematic Transfer Plans, and starting them in the Direct plan of the same scheme.
6. Don't switch in case of Non-Equity funds as tax incidence is very high compared to the benefit; start fresh Direct plans instead.
7. Do remember that going Direct is a compromise on convenience to some extent IF your advisor is already spending time and effort in your fund selection, paperwork and performance tracking satisfactorily.
8. But for savvy investors, who can manage their own investments, Direct plans help.
9. An investor can invest on his own in a Direct plan without the help of an intermediary.
10. A Direct plan has a lower expense ratio since it doesn't include payments to distributors or advisors in the form of commissions, which go to the fund's NAV, and thus to the investors.
11. During transactions in a Direct plan, an investor uses the Direct option instead of a distributor's ARN code.
12. The entire paperwork has to be managed by the investor in a Direct plan.
13. Due to the difference in expense ratio, the returns (and dividends if any) from a Direct and Regular plan will be different even if they have the same portfolio.