Direct Mutual Funds | Advantages for Retail Investors!
Direct Mutual funds are the type of Mutual funds where you can invest in different mutual funds directly without any intermediate brokers like ICICI Direct or any other brokerage. This leads to huge cost savings (45%) for the Retail investors as a direct plan leads to lesser cost for investors when compared with a regular plans as nearly 1% of the expense ratio goes toward commission for the distributor from the AMC (Asset Management company) for the all the intermediaries Here is an example described below
Let us say take the example of ICICI Prudential Gilt Fund which has both direct and regular plans and has consistently has given a return of nearly 8% over the last 10 years. If you have invested in direct plan of ICICI Prudential GILT fund it would save you nearly Rs 45,000 when compared with regular plan of the same fund
| Year | Direct Plan | Regular Plan |
|---|---|---|
| 2013 -Investments | Rs 1,00,000 | Rs 1,00,000 |
| 2023 – Current Value | Rs 3,82,817 | Rs 3,38,380 |
| Savings | Rs 45,000 | Rs 0 |
So it would better to invest in a direct plan of the mutual fund scheme rather than the growth plan of the same mutual fund scheme. Previously we need to approach AMC to invest directly in Mutual funds but nowadays we have sleuth of applications and platforms which would allow us to invest in the direct plans of Mutual funds without any costs.