Are more mutual fund investors shifting to direct plans for extra returns?
Direct mutual fund plans have managed to corner a market share of a little over 40% in the last six years. Mutual funds had introduced direct plans of schemes six years ago as per Sebi directive.
For example, Axis Bluechip Fund - Direct Plan, the topper in the large cap category, is offering 26.72% returns in the last one year. The regular plan of scheme is offering 25.14% during the same period. In three years, the direct plan of the scheme is offering 16.37%, whereas the regular version is returning 14.89%. In five years, JM Core 11 Fund - Direct Plan is the topper in the category with 13.35% returns. Its regular plan is offering 11.71% returns in the same period. This trend is visible across equity mutual fund categories.
Mutual fund advisors say that the difference in the returns of these schemes is because of the difference in charges levied by the direct and regular plans of the schemes. “The schemes have no difference in investment style. The difference in charges, over the years becomes big with compounding. That is why the direct plans score over the regular ones. These schemes rank above the regular plans in the charts and attract new investors,” says Puneet Oberoi, Founder, Excellent Investment Advisors.
Mutual fund managers are a bit wary of talking about the trend.