Direct Plans in Mutual Funds for those who want to invest on their own

Direct Plans in Mutual Funds for those who want to invest on their own

SEBI announced low-cost direct plans in August 2012 where each schemes have plans with lower expense ratio, where investors get in on their own thus AMC/fund houses have not to incur any marketing or distributor commission expense.

This move was to offset increase in expense ratio and other charges of AMCs.

But as the schemes take off from 1 January 2013, the mutual fund companies have found ways to discourage investors to go direct. The mutual fund companies are charging exit loads from 1-3% for switch to direct plans from existing accounts as there is no clarity on this issue from SEBI’s side. It is said that these moves are to protect interests of their distributors and mainly the top ones.

Direct plans are good for those investors who do research on their own and also are ready to do the procedural hassle. Others will continue to rely on advisors for advice on investing in good mutual fund.

It is unclear that weather SEBI wants to encourage or kill the MF industry again. It is noticeable that earlier SEBI introduced restriction on commission and entry load was banished. Still the number of folios declined rather than increase. As a result the number of mutual fund advisors shrank. The in 2012, SEBI again came with a breather for MF industry and advisors fraternity by introducing some ways by which AMCs can incentivize the advisors. IF SEBI wants that retail investors participation increases and equity cult spreads in India through MFs, then it has to rethink its MF industry perspectives and policies and give more room to AMCs and incentivize advisors for introduction of new accounts and investors in semi-urban and rural areas. Apart SEBI should undertake campaigning for investment in MF in association with AMFI.

If you are direct investor into stocks then you can contact us on info@meghainvestments.com or call on 09377008708.